Test Bank Exploring Macroeconomics,
8th Edition /graded A+ (questions and
answer) year 2024/2025
Money - ANSWER-Any asset that can easily be used to purchase goods and services
Medium of exchange - traded for goods, not consumption
Store of value - holds power over time
Unit of account - can be a measure of the value of other goods
Types of Money - ANSWER-Commodity Money
Commodity Backed Money
Fiat Money
COMMODITY MONEY - ANSWER-A good that had value in other uses
,Ex. If the material used to make a quarter costs the amount that a quarter costs
COMMODITY BACKED MONEY (In the textbook) - ANSWER-An asset that takes the place of a commodity
What's not money - ANSWER-Any asset included in stocks, bonds etc.
Credit cards
Why is too much money in circulation a bad thing - ANSWER-The value of the dollar is worth less,
creating inflation
Why is too little money in circulation a bad thing - ANSWER-The value of the dollar is worth more,
creating deflation
What would happen if inflation was negative - ANSWER-It would cause a deflationary spiral, deflation or
0% would cause people not to buy things, creating a deflationary spiral
Is zero percent inflation bad - ANSWER-It is not ideal because an economy would be getting close to
deflation
What types of assets do banks use - ANSWER-Banks use liquid assets to let people buy illiquid things
(harder to sell things)
What are liquid assets - ANSWER-Money that can easily be converted to cash when needed
Ex. Cash, stocks and bonds
Goods that are hard to sell, such as houses or cars, are not liquid because the money is not easily
convertible to cash
, What are bank reserves - ANSWER-Banks required to hold on to certain amount in currency or a Federal
Reserve account
ASSETS - ANSWER-Economic resources (things of value) owned by a firm
Money and other valuables belonging to an individual or business
LOANS OWED AND RESERVES
What the bank owns that has a value
What are the three assets that a bank holds onto - ANSWER-Loans
Reserve requirement
Bonds
Liabilities - ANSWER-Deposits made by customers
This is a liability because a customer can ask for their money at any point
Reserve Ratio - ANSWER-Percent of deposits held as reserves
Minimum percentage set by the Federal Reserve
Banks must have the required reserves at the end of each day
Federal Funds Market - ANSWER-If banks are short of reserve requirements, they can borrow from other
banks
8th Edition /graded A+ (questions and
answer) year 2024/2025
Money - ANSWER-Any asset that can easily be used to purchase goods and services
Medium of exchange - traded for goods, not consumption
Store of value - holds power over time
Unit of account - can be a measure of the value of other goods
Types of Money - ANSWER-Commodity Money
Commodity Backed Money
Fiat Money
COMMODITY MONEY - ANSWER-A good that had value in other uses
,Ex. If the material used to make a quarter costs the amount that a quarter costs
COMMODITY BACKED MONEY (In the textbook) - ANSWER-An asset that takes the place of a commodity
What's not money - ANSWER-Any asset included in stocks, bonds etc.
Credit cards
Why is too much money in circulation a bad thing - ANSWER-The value of the dollar is worth less,
creating inflation
Why is too little money in circulation a bad thing - ANSWER-The value of the dollar is worth more,
creating deflation
What would happen if inflation was negative - ANSWER-It would cause a deflationary spiral, deflation or
0% would cause people not to buy things, creating a deflationary spiral
Is zero percent inflation bad - ANSWER-It is not ideal because an economy would be getting close to
deflation
What types of assets do banks use - ANSWER-Banks use liquid assets to let people buy illiquid things
(harder to sell things)
What are liquid assets - ANSWER-Money that can easily be converted to cash when needed
Ex. Cash, stocks and bonds
Goods that are hard to sell, such as houses or cars, are not liquid because the money is not easily
convertible to cash
, What are bank reserves - ANSWER-Banks required to hold on to certain amount in currency or a Federal
Reserve account
ASSETS - ANSWER-Economic resources (things of value) owned by a firm
Money and other valuables belonging to an individual or business
LOANS OWED AND RESERVES
What the bank owns that has a value
What are the three assets that a bank holds onto - ANSWER-Loans
Reserve requirement
Bonds
Liabilities - ANSWER-Deposits made by customers
This is a liability because a customer can ask for their money at any point
Reserve Ratio - ANSWER-Percent of deposits held as reserves
Minimum percentage set by the Federal Reserve
Banks must have the required reserves at the end of each day
Federal Funds Market - ANSWER-If banks are short of reserve requirements, they can borrow from other
banks
