Money and Macroeconomics

Front

What are the three main functions of money in the U.S. economy?

Back

Standard of value, medium of exchange, store of value

Front

Which type of money is likely to be most stable during economic uncertainty and why?

Back

Commodity money, because it has intrinsic value

Front

A new type of money is introduced that is not backed by a commodity and cannot be exchanged for anything else. What type of money is this?

Back

Fiat money, because it is not backed by a commodity and relies on government order

Front

Why is the "store of value" function of money important? What could happen if money was not a reliable store of value?

Back

People could not save wealth for the future, causing economic instability

Front

What is the main difference between "currency," "demand deposits," and "near money" in terms of how they are used and their liquidity?

Back

Currency and demand deposits can be used right away as money, but near money must be converted to cash first.

Front

Why is "scarcity" important for money? What would happen if money were not scarce?

Back

Money would lose its value and purchasing power.

Front

Why is "acceptability" important for money to work well in an economy?

Back

Acceptability means people agree to use money for buying and selling.

Front

How did the creation of the Federal Reserve System in 1913 change the U.S. banking system compared to earlier banks?

Back

It created a true central bank and national banking system.

Front

If a new type of money was not easily divisible, what problems could occur in daily transactions?

Back

It would be difficult to make exact payments, leading to inefficiency in trade.

Front

How did banking deregulation in the 1980s and 1990s change the U.S. banking system, and what were the risks and benefits?

Back

Deregulation increased competition, led to more bank mergers, and allowed more services, but also raised the risk of financial crises.