D089 - Module 9 - Stabilization Policies Exam

Medium of Exchange - ANSWER-Money is used as a method of payment for goods and services. Store of value - ANSWER-People use money to preserve purchasing power from the present to the future. Unit of account - ANSWER-Money is used to measure and compare the values of goods and services. Standard of deferred payment - ANSWER-Loans and future agreements are stated in monetary terms. List the characteristics of successful currencies. - ANSWER-Durable, divisible, portable, and resistant to counterfeiting An item that is used as money but has value in a different use. Eg/ Gold - ANSWER-Commodity money Money that is declared by the government to be legal tender - ANSWER-Fiat Money Currency + Checkable Deposits + Traveler's Checks - ANSWER-M1 M1 + Savings + Money market funds - ANSWER-M2 The central bank in the United States - ANSWER-Federal Reserve What are the responsibilities of the FED? - ANSWER-Conducting monetary policy, regulating financial institutions, providing banking services to depository institutions, and promoting financial stability. fractional reserve banking system - ANSWER-banks keep a fraction of deposits as reserves and use the rest to make loans Who controls monetary policy at the Fed? - ANSWER-Federal Open Market Committee (FOMC) What function of money is this? Buying a car with cash. - ANSWER-Medium of Exchange What function of money is this? Comparing car prices. - ANSWER-Unit of Account What function of money is this? Savings for a car. - ANSWER-Store of Value