Macro FTC1 Unit 5 Study Guide Money, Financial Markets, and Monetary Policy- Western Governors University

Unit 5: Money, Financial Markets, and Monetary Policy Introduction *Money in the Economy *What is Money The word money means different things to different people. Here are some ways in which economists do not use the word money: 1. How much money (income) did you earn last year? 2. Most of his money (wealth) is tied up in bonds. 3. It is almost impossible to get mortgage money (loans) in today’s market. 4. This country does not have enough money (productive resources) to increase both military and social spending. *The Functions of Money 1. A main function of money is to avoid the need for double coincidence of wants. What is the name of this function? Medium of exchange function Correct. As a medium of exchange, money avoids the need for double coincidence of wants. 2. The standard of value function of money refers to money as a method of measurement or comparison. Correct. The standard of value makes money a method of measurement and comparison. 3. Which of the following is a function performed by a modern society's money? Store of wealth Correct. Store of wealth is a function of money. 4. Suppose you store part of your income in the form of money to be used 1 year from now. Which function of money are those dollars performing?