ECON 2102 Finals Questions and Correct Verified
Answers
money - ✔✔the set of assets in an economy that people regularly use to buy goods and
services
medium of exchange - ✔✔an item that buyers give to sellers when they want to purchase
goods and services
unit of account - ✔✔the yardstick people use to post prices and record debts)
store of value - ✔✔an item that people can use to transfer purchasing power from the present
to the future
liquidity - ✔✔the ease with which an asset can be converted into the economy's medium of
exchange
commodity money - ✔✔money that takes the form of a commodity with intrinsic value
fiat money - ✔✔money without intrinsic value that is used as money by government decree
currency - ✔✔the paper bills and coins in the hands of the public
demand deposits - ✔✔balances in bank accounts that depositors can access on demand by
writing a check
Federal Reserve - ✔✔the central bank of the United States
central bank - ✔✔an institution designed to oversee the banking system and regulate
thequantity of money in the economy
, money supply - ✔✔the quantity of money available in the economy
monetary policy - ✔✔the setting of the money supply by policymakers in the central bank
reserves - ✔✔deposits that banks have received but have not loaned out
fractional-reserve banking - ✔✔a banking system in which banks hold only a fraction
ofdeposits as reserves
reserve ratio - ✔✔the fraction of deposits that banks hold as reserves
money multiplier - ✔✔the amount of money that results from each dollar of reserves
bank capital - ✔✔the resources a bank's owners have put into the institution
leverage - ✔✔the use of borrowed money to supplement existing funds for investment
purposes
leverage ratio - ✔✔the ratio of assets to bank capital
capital requirement - ✔✔a government regulation specifying a minimum amount of bank
capital
open-market operations - ✔✔the purchase and sale of U.S. government bonds by the Fed
discount rate - ✔✔the interest rate on the loans that the Fed makes to banks
Answers
money - ✔✔the set of assets in an economy that people regularly use to buy goods and
services
medium of exchange - ✔✔an item that buyers give to sellers when they want to purchase
goods and services
unit of account - ✔✔the yardstick people use to post prices and record debts)
store of value - ✔✔an item that people can use to transfer purchasing power from the present
to the future
liquidity - ✔✔the ease with which an asset can be converted into the economy's medium of
exchange
commodity money - ✔✔money that takes the form of a commodity with intrinsic value
fiat money - ✔✔money without intrinsic value that is used as money by government decree
currency - ✔✔the paper bills and coins in the hands of the public
demand deposits - ✔✔balances in bank accounts that depositors can access on demand by
writing a check
Federal Reserve - ✔✔the central bank of the United States
central bank - ✔✔an institution designed to oversee the banking system and regulate
thequantity of money in the economy
, money supply - ✔✔the quantity of money available in the economy
monetary policy - ✔✔the setting of the money supply by policymakers in the central bank
reserves - ✔✔deposits that banks have received but have not loaned out
fractional-reserve banking - ✔✔a banking system in which banks hold only a fraction
ofdeposits as reserves
reserve ratio - ✔✔the fraction of deposits that banks hold as reserves
money multiplier - ✔✔the amount of money that results from each dollar of reserves
bank capital - ✔✔the resources a bank's owners have put into the institution
leverage - ✔✔the use of borrowed money to supplement existing funds for investment
purposes
leverage ratio - ✔✔the ratio of assets to bank capital
capital requirement - ✔✔a government regulation specifying a minimum amount of bank
capital
open-market operations - ✔✔the purchase and sale of U.S. government bonds by the Fed
discount rate - ✔✔the interest rate on the loans that the Fed makes to banks
