Money Money Money

Which term refers to the use of money?

• barter

• capitalist

• socialist

• financial

Before the development of money as a medium, which was used by people to exchange goods?

• barter system

• financial system

• stock market

• venture capital

Which most accurately explains why fiat money differs from commodity money?

• Fiat money can also be used as a productive input.

• Fiat money has value because it is a precious metal such as gold.

• Fiat money only has value as a medium of exchange.

• Fiat money has value because it enables the barter system to work.

Which most accurately explains why fiat money has no value in itself?

• Fiat money is not a durable commodity.

• Fiat money has only a single use as a medium of exchange.

• Fiat money only has value as long as the free-market system exists.

• Fiat money is always a precious metal that only has value because of its beauty.

Which is the purpose of requiring banks to keep a specific percentage of their deposits on hand in the vault?

• to prevent growth of the money supply from stagnating

• to ensure that banks have enough money to loan to potential customers

• to make sure customers' demands for withdrawals can be met instantly

• to enable the government to calculate the bank's tax burden more easily

Which is the purpose of the Federal Reserve Bank?

• protect bank depositors against losing their money

• manage the growth of the U.S. economy

• prevent stock market fraud

• issue government bonds

Which is the purpose of the U.S. Treasury department?

• protect bank depositors against losing their money

• manage the growth of the U.S. economy

• prevent stock market fraud

• issue government bonds

Which can the Fed accomplish by raising or lowering the required reserve ratio?

• prevent a budget deficit

• reduce housing prices

• increase or decrease the money supply

• ensure an equitable distribution of wealth

Which explains how Treasury bonds can have an effect on the size of the money supply?

• The use of Treasury bonds to pay for government expenses leads to increased inflation.

• The Federal Reserve Bank can buy and sell Treasury bonds to raise or lower bank deposits.

• The existence of Treasury bonds increases competition among banks to offer low-interest loans.

• The government can avoid running a budget deficit and reducing the money supply by issuing Treasury bonds.

Which describes the most likely effect of the sale of a new batch of Treasury bonds?

• an increase in unemployment

• a reduction in the inflation rate

• an increase in the money supply

• a decrease in the money supply