SS8B Unit 4 Exam Review

Front

What are bills and coins commonly referred to as?

Back

Money or Currency

Answer explanation

Bills and coins are commonly referred to as "Money or Currency" because they are the physical forms of money used for transactions, distinguishing them from other financial instruments like assets or tokens.

Front

How can people use money?

Back

People can use money to buy, save, invest, donate, and pay debts.

Answer explanation

People can use money in various practical ways, such as buying goods, saving for the future, investing for growth, donating to causes, and paying off debts. The other options are unrealistic and not feasible.

Front

What happens to prices when the money supply increases?

Back

Prices generally increase when the money supply increases.

Answer explanation

When the money supply increases, more money is available in the economy, leading to higher demand for goods and services. This increased demand typically results in higher prices, making 'Prices generally increase when the money supply increases' the correct choice.

Front

What is the purpose of a bank for consumers?

Back

The purpose of a bank for consumers is to provide financial services, including safekeeping of money, credit access, and investment opportunities.

Answer explanation

The correct choice highlights that banks provide essential financial services to consumers, such as safekeeping money, offering credit, and facilitating investments, which are crucial for managing personal finances.

Front

What is the federal reserve rate?

Back

The federal reserve rate is the interest rate for overnight loans between banks.

Answer explanation

The correct choice defines the federal reserve rate as the interest rate for overnight loans between banks, which is crucial for maintaining liquidity in the banking system. The other options describe different financial rates.

Front

What is the purpose of fractional reserve banking?

Back

The purpose of fractional reserve banking is to enable banks to create money and support economic activity by lending out a portion of deposited funds.

Answer explanation

The purpose of fractional reserve banking is to enable banks to create money and support economic activity by lending out a portion of deposited funds, which stimulates growth and liquidity in the economy.

Front

What is the purpose of a commercial bank?

Back

The purpose of a commercial bank is to provide financial services such as accepting deposits, granting loans, and facilitating transactions.

Answer explanation

The correct choice highlights that the primary purpose of a commercial bank is to provide essential financial services, including accepting deposits, granting loans, and facilitating transactions, which are crucial for economic activity.

Front

What could happen to the economy if commercial banks stopped giving loans?

Back

The economy could face slower growth, higher unemployment, and potential recession.

Answer explanation

If commercial banks stopped giving loans, businesses and consumers would struggle to finance operations and purchases, leading to slower economic growth, higher unemployment, and potentially a recession.

Front

What does the Fed do?

Back

The Fed manages the country's monetary policy and regulates financial institutions.

Answer explanation

The correct choice is that the Fed manages the country's monetary policy and regulates financial institutions, which are key functions of the Federal Reserve. The other options do not accurately describe the Fed's role.

Front

How does the Fed support a healthy economy?

Back

The Fed supports a healthy economy by managing monetary policy and regulating financial institutions.

Answer explanation

The Fed supports a healthy economy by managing monetary policy, which influences interest rates and money supply, and by regulating financial institutions to ensure stability and trust in the financial system.