Monetary Policy

Something that efficiently functions as a medium of exchange, store of value, and unit of account, is considered ______.

• money

• barter

• Government bonds

• commodity futures.

Which function of money is the above picture an example of?

• Store of Value

• Unit of Account

• Means of Currency

• Medium of Exchange

Which choice does NOT describe a basic function of money?

• a medium of exchange

• a measure of value

• a store of value

• a traded item

Bill has been saving money from each of his paychecks in a separate account at his local credit union he calls his "fun money".

Bill has saved $1,000 and is starting to think about ways he may use his fun money. He knows that $1,000 could afford him a nice vacation to the mountains for a few days, or the new tires he wants for his truck. He has also considered spending the money on repainting his home. The possibilities seem endless!

Which function(s) of money is BEST represented by Bill's $1000 fun money?

• unit of account

• medium of exchange

• unit of account and store of value

• medium of exchange and store of value

If nominal interest rates are 7% and there is 3% inflation, what is the real interest rate?

• 3%

• 4%

• 7%

• 10%

The Federal Reserve uses various measures to change the money supply and encourage economic activity. This is referred to as

• fiscal policy.

• monetary policy.

• demand economics.

• supply side economics.

A short-term monetary policy action would MOST LIKELY

• lower federal taxes.

• lower interest rates.

• raise medicare coverage.

• raise unemployment insurance.

Why would adjusting the money supply be expected to increase economic growth during a recession?

• Increasing the money supply will encourage more saving.

• Increased money supply will encourage more spending and investment.

• Decreased money supply will encourage more spending and investment.

• Recession is caused by too much spending, so money supply must be reduced.

The Federal Reserve wants to increase the money supply in the United States. What is the Federal Reserve likely to do to accomplish this?

• reduce the discount rate

• sell securities on the open market

• increase the reserve requirement for banks

• require banks to hold a reserve for all types of deposits

Which is a monetary policy that would be useful in stopping deflation?

• decreasing taxation

• increasing the discount rate

• increasing government spending

• decreasing the reserve requirement