ECN EXAM 3 QUESTIONS AND ANSWERS

ECN EXAM 3 QUESTIONS AND ANSWERS
What is money? - CORRECT ANSWER✅✅A medium of exchange. A store of value. A unit of account



What is the role of the Federal Reserve System? - CORRECT ANSWER✅✅Serves as a central bank for
the US that provides a stable monetary climate :

1) controls money supply

2) is the "bankers bank"

3) regulates the banking sector



What is the basic structure of the fed? - CORRECT ANSWER✅✅12 geographic regions, each having their
own FED president



What is the difference between the Fed and the Treasury? - CORRECT ANSWER✅✅Fed -

- Monetary climate of the economy

- Buy/ sell treasury bonds

- Controls money supply and monetary policy

Treasury -

- Finance of federal expenditures

- Issues bonds to public to finance the government's budget deficits

- DOES NOT determine the money supply



How can the fed increase/decrease the supply of money? - CORRECT ANSWER✅✅OMO, Reserve
requirement, Loan extensions, Interest paid on reserves



What is the primary long-run effect of rapid increases in the supply of money? - CORRECT
ANSWER✅✅The value of money decreases along with stagflation



How do banks create money? - CORRECT ANSWER✅✅by extending loans