The Monetary System

Which of the three functions of money is described here?

• A medium of exchange

• A unit of exchange

• A store of account

• A medium of exchange

What is Fiat money?

• A type of currency backed by gold and silver

• A type of currency often used in international transactions

• A type of currency based on the value of commodities

• A type of currency whose value is determined by the government and user acceptance

Which of the following best defines money?

• Paper currency or coins

• Currency that has intrinsic value, such as gold coins

• Any asset that is accepted as a way of paying for something

• Cash held in bank

The three main tools of monetary policy are

• open-market operations, reserve requirements, and the refinancing rate.

• the money supply, government purchases, and the refinancing rate

• fiat, commodity, and deposit money.

• government expenditures, taxation, and reserve requirements.

_________ is a form of exchange in which the buyer and the seller trade goods or services directly with each other without using currency. Instead of purchasing goods or services with money, they agree to exchange their own products for the products or services they need from each other.

• Bartering

• Fiat money

• Near money

• Credit card

Which of the following is NOT true about the Federal Reserve?

• It regulates the banking system.

• It lends to banks.

• It was established by the U.S. Constitution.

• It conducts open-market operations.

M1 includes savings deposits

• True

• False

This term refers to the ease with which you can convert an asset to cash with little or no loss of purchasing power.

• legal tender

• liquidity

• acceptability

• uniformity

Which of the following statements is correct?

• All items that are included in M2 are included also in M1.

• Credit cards are included in both M1 and M2.

• Savings deposits are included in both M1 and M2

• All items that are included in M1 are included also in M2.

This classification of money includes coins, paper money, checkable deposits.

• M1

• M2

• M3