Unit 4 Review

Commodity money can best be described as --

• trade good or services between two people without the exchange of money

• currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves

• a form of money which has an intrinsic value, meaning it is worth something in its own right rather than simply being a token of financial value

• money that consists of a token or certificate that can be exchanged for a specific good, such as gold, silver, or potentially water, oil, or food

One of the disadvantages of operating a barter system is that trading is--

• taking place without currency

• carried out in very large markets

• limited by availability and demand

• conducte without consumer protections

One advantage to using a debit card is that it allows the user to --

• build a strong credit score

• repay credit card debts faster

• access currency without carrying cash

• purchase goods without having any money

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Money that has value simply because the government says it does is called--

• credit

• currency

• fiat money

• representative money

One way the Federal Reserve can counter unemployment and stimulate spending is by --

• selling securities

• decreasing the discount rate

• tightening monetary policies

• increasing the reserve requirement

In order to require banks to hold more money as opposed to lending it, the Federal Reserve can --

• decrease the discount rate

• decrease the federal funds rate

• increase the reserve requirement

• suspend the federal funds rate target

Which of the following is an action of the Federal Reserve that strongly influences local economies?

• It can raise or lower property taxes.

• It can provide stimulus money for job creation.

• It can require banks to provide savings accounts to the community

• It can make loans cheaper or more expensive by adjusting interest rates.

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Open market operations, the discount rate, and reserve requirements are used by the Federal Reserve to most directly affect the --

• amount of taxes collected

• minimum wages of workers

• cost of doing business overseas

• supply of money in the economy

During an economic recession the Federal Reserve Banks will most likely react by --

• easing monetary policy making it easier to lend money

• raising the discount rate to affect the monetary supply

• tightening monetary policy making lending more difficult

• reducing open market transactions to reduce the money supply

Which scenario is most likely to result when the Federal Reserve raises the reserve requirement?

• More money is required to be kept in banks to loan out to businesses, so they can invest in their companies.

• More money is required to be kept in bank reserves, and less is available to be loaned out to businesses to invest in the economy.

• More money is required to be kept in the Federal Reserve banks to make it available for loans to member banks in poor economic times.

• More money is required to be kept in the Federal Reserve Banks, which increases the amount of money in circulation and stimulates the economy