ECON MONEY & BANKING EXAM 1

ECON MONEY & BANKING EXAM 1

Theoouniqueooandoomostooprimaryoofunctionooofoomoneyooisoothatooitooservesooasooaoo-
ooans--✔✔generallyooacceptableoomeansooofoopayment.
also:
(storeooofoovalue.
unitooofooaccount.)

WhichooofootheseooisooconsideredoomoneyooinootheooU.S.ootoday?oo-ooans--✔✔Currency

M1oocontainsoowhichooofootheoofollowing?oo-ooans--✔✔Travelers'oochecks
checkableoodeposits
otheroocheckableoodeposits
demandoodepositsooatoocommercialoobanks
currencyooinootheoohandooofootheoopublic

Theoomeansoobyoowhichootransactionsooareoocompletedooisoocalledoo-ooans--
✔✔theoopaymentsoomechanism.

Theoointentooofooanooelectronicoofundsootransferoosystemooisootooo-ooans--
✔✔increaseooconvenienceooandooserviceootoootheoopublicooandooreduceootheoocostsooofoo
makingoopayments.

Aoocardoowithooaoomicroprocessoroochipooembeddedooinooitoothatoousuallyooincludesooaood
igitaloosignatureooisoocalledooaoo-ooans--✔✔smartoocard.

Theoobestooknownooandoomostoopopularooformooofooelectronicootransferooofoofundsooisoo-
ooans--✔✔anooautomatedootelleroomachineoo(ATM).


Ifoosignificantoocostsooareoorequiredootoooconvertooaooparticularootypeooofooassetootooomon
ey,ooitooisoousuallyooreferredootoooasoo-ooans--✔✔illiquid

Inooanooeconomy,oomoneyoopromotesoo-ooans--✔✔efficientooproduction

Aoostoreooofoovalueooisoowhichooofootheoofollowing?oo-ooans--
✔✔somethingoowhichooretainsooitsoovalueooifooheld

Domesticoononfinancialoodebtoo(DNFD)oo-ooans--
✔✔includesoototaloooutstandingoocreditoomarketoodebtooowedoobyootheoodomesticoopublic
ooandooprivateoononfinancialoosectors,ooincludingoogovernmentooandooprivateoodebt.

, Monetaryoopolicyoohasootwoooobjectives:oo-ooans--
✔✔toooensureoothatoosufficientoomoneyooandoocreditooareooavailableootooomeetootheoonee
dsooofootheooeconomyooandootooominimizeoofluctuations—
recessionsooandooinflationaryoobooms—aroundooaoolong-termootrend.

TheoopartooofootheooFederalooReserveooSystemooresponsibleooforoosettingootheoorequiredo
oreserveooratioooisootheoo-ooans--✔✔BoardooofooGovernors.


BecauseootheooFedoocontrolsootheooamountooofoorequiredooreserveooassetsoothatoodeposi
toryooinstitutionsoomustoohold,ooitooalsooooperatesooaoolendingoofacilityoocalledootheoo-
ooans--✔✔discountoowindow.


InooJanuaryoo2003,ooaoonewoopolicyoowasooimplementedoobyootheooFedoothatooestablishe
dooaooprimaryoocreditoorateooforooitsoolendingoofacility.ooToday,oothisoorateooisoooftenoorefer
redootoooasootheoo-ooans--✔✔discountoorate.

Fundsoothatoowereoo"swept"oooutooofoocheckableoodepositsooandoointooomoneyoomarketoo
depositooaccountsoo(MMDAs)oo-ooans--
✔✔allowoodepositoryooinstitutionsootoooshiftoocustomers'oofundsoooutooofooaccountsoothato
oareoosubjectootoooreserveoorequirementsooandoointooohighlyooliquidooaccountsoothatooareo
onot.


Byoolaw,ootheooprimaryooobjectiveooofootheooEurosystemooisootooo-ooans--
✔✔maintainoopriceoostabilityooinootheooEurooozone.

Theoo__________ooareootheoosevenoomembersooofootheooFedooappointedoobyootheoopresi
dentooandooapprovedoobyootheoosenateootoooserveoofourteen-
yearooterms;ootheyoomakeooupootheoocoreooofootheooFedooandooareoolocatedooinooWashing
ton,ooD.C.oo-ooans--✔✔BoardooofooGovernors

Theoo__________oois/areootheooprincipaloopolicy-
makingoobodyoowithinootheooFederalooReserveooSystemoothatoodeterminesoomonetaryoop
olicy.oo-ooans--✔✔FederalooOpenooMarketooCommitteeoo(FOMC)

TheooFederalooReserveooActoothatoocreatedootheooFederalooReserveooSystemoowasoopas
sedooinoo-ooans--✔✔1913.

TheooFederalooReserveooSystemoowasoocreatedoobyootheoo-ooans--✔✔Congress

TheootermsooofooFedoogovernorsooareooarrangedoosooothatoooneootermooexpiresooeveryoo-
ooans--✔✔2ooyears.


Whichooisooanooexampleooofooaoofinancialooinstrumentoothatooisootraded?oo-ooans--
✔✔Treasuryoobonds
corporateoobonds
Treasuryoobills