Chapter 14 Quiz
Which of the following best explains the difference between commodity money and fiat money?
Fiat money has no value except as money, whereas commodity money has value independent of its use as money.
Which of the following is NOT a function of money?
Acceptability
Which of the following is true with respect to hyperinflation?
All of the above. It is caused by central banks increasing the money supply at a rate much greater than the growth rate of real GDP. It can be hundredslong dash—even thousandslong dash—of percentage points per year. In the presence of hyperinflation, firms and households avoid holding money.
The Federal Reserve uses two definitions of the money supply, M1 and M2, because
M1 is a narrow definition focusing more on liquidity, whereas M2 is a broader definition of the money supply.
Which of the following is included in M2 but not M1?
Money market deposit accounts in banks
The formula for the simple deposit multiplier is
Simple Deposit Multiplier = 1/RR
When the Federal Reserve decreases the discount rate,
The money supply will decrease.
Excess reserves
are reserves banks keep above the legal requirement.
Look carefully at the following list. a. The coins in your pocket. b. The funds in your checking account. c. The funds in your savings account. d. The traveler's check that you have left over from a trip. e. Your Citibank Platinum MasterCard. Which of the things above are NOT included in the M1 definition of the money supply?
c. The funds in your savings account. e. Your Citibank Platinum MasterCard.
In addition to the Federal Reserve Bank, what other economic actors influence the money supply?
Households, firms, and banks.