Functions of Money and Federal Reserve

You swap an Oreo cookie for a bag of Doritos with a friend at lunch. What function of money is this?

• Medium of exchange

• Unit of account

• Store of value

• Bartered item

You keep a $10 bill in your car for emergency purposes. What function of money is this?

• Medium of exchange

• Unit of account

• Store of value

• Bartered item

Your teacher tells you the average income per person is $70,000. What function of money is this?

• Medium of exchange

• Unit of account

• Store of value

• Bartered item

You buy a Starcrooks coffee for $8. What function of money is this?

• Medium of exchange

• Unit of account

• Store of value

• Bartered item

Fiat money has no intrinsic/fixed value and is not backed by any tangible asset. What is true about fiat money?

• Performs all the functions of money except providing a unit of account.

• Has value because the government says so.

• May be used as a medium of exchange but is not legal tender.

• Is worthless.

How many Federal Reserve Districts are there?

• 20

• 9

• 12

• 6

What type of policy does the Fed use to counteract a contraction/recession?

• Tight money policy

• Loose money policy

• Fiscal policy

• Policy lags

What is the role of the Federal Open Market Committee?

• It makes key decisions about interest rates and the growth of the United States money supply.

• It collects information and reports on economic conditions to the Board of Governors.

• Composed of seven members appointed by the President, it oversees the Federal Reserve System.

• It redraws the map of the twelve Federal Reserve Districts every ten years in response to economic changes.

Which of these situations is most likely to cause the Fed to introduce a tight money supply?

• A recession has reduced aggregate demand and increased unemployment.

• The federal government passes a new budget with a large deficit.

• The economy is expanding quickly and inflation is a concern.

• The economy is prosperous with relatively low inflation and low unemployment.

This is the name for the fee that the Fed charges member banks when they borrow money.

• Discount rate

• Reserve rate

• Prime rate

• Currency rate