econ- unit 5 vocab(with Errorless answers)
barter economy correct answers moneyless economy that relies on trade or barter
commodity economy correct answers money that has an alternative use as an economic good; gunpowder,
flour, corn, etc.
fiat money correct answers money by government decree; has no alternative value or use as a commodity
federal reserve system correct answers privately owned, publicly controlled, central bank of the United
States
fractional reserve system correct answers a system requiring financial institutions to set aside a fraction of
their deposits in the form of reserves
medium of exchange correct answers money or other substance generally accepted as payment for goods
and services; one of the three functions of money
measure of value correct answers one of the three functions of money that allows it to serve as a common
denominator to measure value
store of value correct answers one of the three functions of money allowing people to preserve value for
future use
diversification correct answers Spreading out investments to reduce risk
M1 correct answers narrow definition of money supply conforming to money's role as medium of
exchange; components include coins, currency, checks, other demand deposits, traveler's checks
M2 correct answers broad definition of money supply conforming to money's role as a medium exchange
and a store of value; components include M1 plus savings deposits, time deposits, and money market
funds
barter economy correct answers moneyless economy that relies on trade or barter
commodity economy correct answers money that has an alternative use as an economic good; gunpowder,
flour, corn, etc.
fiat money correct answers money by government decree; has no alternative value or use as a commodity
federal reserve system correct answers privately owned, publicly controlled, central bank of the United
States
fractional reserve system correct answers a system requiring financial institutions to set aside a fraction of
their deposits in the form of reserves
medium of exchange correct answers money or other substance generally accepted as payment for goods
and services; one of the three functions of money
measure of value correct answers one of the three functions of money that allows it to serve as a common
denominator to measure value
store of value correct answers one of the three functions of money allowing people to preserve value for
future use
diversification correct answers Spreading out investments to reduce risk
M1 correct answers narrow definition of money supply conforming to money's role as medium of
exchange; components include coins, currency, checks, other demand deposits, traveler's checks
M2 correct answers broad definition of money supply conforming to money's role as a medium exchange
and a store of value; components include M1 plus savings deposits, time deposits, and money market
funds
