Econ Unit 4 Quiz

What problem did the introduction of Federal Reserve Notes help fix with the banking system?

They give the United States a single currency as opposed to every bank producing their own currency notes.

True or False: Money's use as a store of value refers to how it can maintain its value over time.

True

The Fed has set the reserve requirement to 10%. Assume that Big Bank Inc has $100 million worth of deposits by its customers. How much money is available for Big Bank Inc to loan out?

$90 million

Bank Run

A situation in which many depositors simultaneously decide to withdraw money from a bank

Which statement best describes money's function as a unit of account?

All goods and services in the United States are priced with dollars, allowing their values to be compared.

American colonists and Native Americans used tobacco as their medium of trade.

Commodity Money

Ancient Rome used to pay their soldiers with salt.

Commodity Money

British colonies in the Caribbean used rum as a medium of exchange.

Commodity Money

In the aftermath of the devastation of World War II, cigarettes and gasoline were used in parts of Europe to purchase goods

Commodity Money

National Banking Act of 1863

Created a system of banks chartered by the National Government that would create a uniform currency for the US

Which chart correctly identifies the correct hierarchy of the Federal Reserve System?

Federal Reserve Board 12 Federal Reserve Banks Member Banks

Early American colonies produced notes that their governments mandated could legally be used to pay taxes.

Fiat Money

In 18th century Sweden, the government mandated that businesses must accept paper money that could not be exchanged for precious metals.

Fiat Money

The American dollar today is used to trade all over the world.

Fiat Money

Which form of currency would be the easiest for a government to create more of without limit?

Fiat Money

Bank of the United States (BUS)

First bank of the US charted by the national government

Alexander Hamilton

Founding father most associated with creating the banking system for the United States

Thomas Jefferson

Founding father opposed to creating a national bank

Federal Deposit Insurance Corporation (FDIC)

Government assurance that bank customers accounts are safe and will be reimbursed if a bank fails

One advantage that money has over bartering is its role as a medium of exchange, which refers to how _____.

all members of society will accept it as payment for a trade

The FDIC's (Federal Deposit Insurance Corporation) main purpose is to

assure Americans that their bank deposits are safe.

The island of Economics Bay uses colored sea shells as their currency. These shells are valued for their use in their jewelry. This is an example of _____currency.

commodity

A certificate allows the bearer to claim a new car.

Representative Money

A customer writes several checks at the mall to pay for their purchases.

Representative Money

Federal Reserve (FED)

The US current central bank that oversees and regulates the nations banks

Savings-Economic Growth Relationship

The more money saved in banks, more banks loan money leading to more spending and job creation

Federal Reserve Note

The sole paper currency valid in the US, printed by the central bank

The main characteristic of commodity money that makes it differ from other types of money is that

has an inherent use and value separate from its role as money

In the past, a United States dollar bill was representative money, which refers to how_____.

its value was based on the ability to exchange it for gold or silver

One of the most important effects caused by people saving their money in banks is that banks _____.

loan this money out to individuals and businesses who invest it and grow the economy

Your community bank actually creates money and increases the money supply whenever it _____.

loans out money that its customers have deposited with them

Finanical Intermediary

one of the main functions that banks serve, connects people who want to save money with people who want to borrow

Today, American paper currency is fiat money, which refers to how _____.

the government mandates that it must be accepted

The Federal Reserve issues Federal Reserve Notes, which are _____.

the single paper currency valid in the United States