lesson 10 quiz - 1. In economics money performs which of...

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1. In economics “money” performs which of the following basic functions? Medium of exchange Standard of value Store of value 2. The value (purchasing power) of money is strongly influenced by government’s control over the size of the money supply 3. As the “central bank” for the United States the Federal Reserve is the primary manager of the money supply. 4. Most of all, the American dollar is backed by the goods and services (GDP) produced by the economy. 5. Assume prices increase by 20 percent from a base year in 2010 to 2011. The price index moves from 100 to 120 and therefore 1/120 x 100= 83 cents for the value (purchasing power) of a dollar. 6. In the graph below, decreases in the supply of money (shift to the left) by the Fed will, all other things being equal, increase the interest rate. 7. With approximately two-thirds of U.S. dollars abroad (outside the country), the American banking system is truly global in nature. 8. In our Circular Flow example we see the Fed’s most powerful tool labeled as Reserve Adjustments 9. In our Circular Flow example one way that the Fed makes its “Reserve Adjustments” to the banking system by buying bonds. 10. The banking system in the United States is a dual banking system with both state and federal (national) banks. 11. The new central banking system created in 1913 consisted of a Board of Governors (the policy making body) and twelve regional banks that dispersed some of the banking power away from the Eastern banking establishment of that era. 12. The “currency” component of M1 consists of b. and c. 13. M2 includes savings that are easily transferable to “cash” with a short time delay and is thereby considered to be “near monies.” 14. In our Circular Flow example we see the Fed’s most powerfu l tool labeled as “Reserve Adjustments”. 15. If weak choices are made by the newly added “hybrid organization” in our Circular Flow diagram, then a great deal of long term damage can be done to the economy. . 16. Assume prices increase by 11 percent from a base year in 2010 to 2011. The price index moves from 100 to 111 and therefore 1/111 x 100= 90 cents for the value (purchasing power) of a dollar. 17. In the middle portion of this decade, “currency” was a little over 50 percent of the M1 and
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This note was uploaded on 06/18/2011 for the course ECON 2302 taught by Professor Methenitis during the Fall '10 term at Richland Community College.

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lesson 10 quiz - 1. In economics money performs which of...

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