Understanding Money and Its Functions

Front

What is Fiat money?

Back

Money issued without being backed by gold or other precious metal

Front

What is the basic money supply called and what is it made of? Options: M1, made of currency, coins, and checking account deposits; M2, made of savings accounts and money market funds; M3, made of stocks and bonds; M4, made of real estate and gold.

Back

M1, made of currency, coins, and checking account deposits

Front

What does the fractional reserve system require banks to keep only a fraction of?

Back

Deposits

Front

What is the FDIC?

Back

A banking reform that established the Federal Deposit Insurance Corporation and a corporation that provided deposit insurance to Americans.

Front

During the Great Moderation, the economy experienced low, stable inflation and what else?

Back

Economic expansion

Front

Why does the Fed monitor interactions between investors, savers, borrowers, and businesses, like Alvin and Naomi who are planning to start a new venture?

Back

To ensure financial institutions can withstand economic stress.