MACRO chp13
If a financial institution pays an interest rate of 1% to savers and charges borrowers 3%, they earn a profit of _____
2%
Identify the statement that is true of a barter system.
In a barter system, trade will only occur if there is a double coincidence of wants.
Which of the following is correct regarding the discount rate?
It is the interest rate at which depository institutions can borrow from the Federal Reserve.
Which of the following statements is true of open-market operations?
Open-market operations involve the Fed's purchase and sale of government securities.
How does money function as a unit of account?
The prices of all goods and services are measured in terms of money.
Which of the following is true of a price level increase in an economy?
When the price level increases, the purchasing power of money decreases.
Financial institutions _____
accumulate funds from savers and lend them to borrowers.
The FDIC insures deposits in _____
any banking institution that purchases FDIC insurance.
The members of the Board of Governors of the Fed are _____
appointed by the president with the approval of the Senate.
The earliest type of exchange involved _____
barter
The Federal Reserve System has the power to _____
buy and sell federal government securities.
Examples of depository institutions
commercial banks, credit unions, thrift institutions, and savings and loan associations
Which of the following was the earliest type of money?
commodity money
Federal Reserve notes are _____
fiat money
A lender of last resort is a financial institution that is willing and able to lend to _____
fractional reserve system banks experiencing runs on their deposits.
Money that is acceptable because the government requires that it be accepted in payment of debt is _____
legal tender.
An important function of commercial banks is to _____
make loans
The unit of account function of money _____
means that money is used to measure the value of all goods.
Token money is _____
money whose face value exceeds its production cost.
Each member of the Board of Governors of the Fed _____
serves one nonrenewable term.
The three important functions of money are _____
serving as a medium of exchange, a unit of account, and a store of value.
The Board of Governors of the Fed consists of _____
seven members appointed by the president.
The discount rate is the interest rate that _____
the Fed charges on loans to depository institutions.
The reserve requirement refers to _____
the fraction of deposits that banks are required by the Fed to hold as reserves.
