Part 1.docx - First 1 What are the six characteristics of...

First
1. What are the six characteristics of money? Explain how the U.S. dollar has those six
characteristics.
1. Acceptability – the dollar is acceptable as payment for goods and services and settlement
of debts.
2. Divisibility – money must be divisible into small units to facilitate exchanges. The dollar
is divisible into pennies, nickels, dimes, and quarters.
3. Portability – money must be easily transported. The dollar is lightweight and folds
easily.
4. Durability – dollars last an average of eighteen months and can be folded thousands of
times.
5. Stability – the dollar is reasonably stable. A dollar will buy a dollar's worth of goods and
services today or next week.
6. Difficulty of counterfeiting – the dollar is extremely difficult to counterfeit because of
the paper and ink used in printing.
2. What is the difference between a credit card and a debit card? Why are credit cards
considerably more popular with U.S. consumers?
A credit card allows consumers to make purchases and pay for them over time at a specified
interest rate. With a debit card, the amount of a purchase is immediately deducted from the
consumer's account, if enough funds are available. Credit cards are considerably more popular
with U.S consumers because they allow instant financing of purchases and are generally
accepted around the world. Debit cards, however, are beginning to grow in popularity because of
their convenience.
3. Discuss the four economic goals the Federal Reserve must try to achieve with its
monetary policy.

4. Explain how the Federal Reserve uses open market operations to expand and
contract the money supply.