Econ 2102 Final Exam Questions and Answers| New Update with 100% Correct 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
reserve requirements regulations on the minimum amount of reserves that banks must hold
against deposits
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
reserve requirements regulations on the minimum amount of reserves that banks must hold
against deposits
