What Is Money?

Which of the following is one of the three main functions of money?

A unit of account

Which of the following is a function of money?

A way for buying and selling goods and services. Medium of exchange.

When the Federal Reserve System (Fed) loosens or tightens the money supply, the (Federal funds rate and interest rate) are influenced in the economy.

Federal funds rate and interest rate

__________ consists of the taxation and expenditure policies of the federal government.

Fiscal policy

A situation in which prevailing interest rates are low and savings rates are high, making monetary policy ineffective, is known as __________.

the liquidity trap

Which of the following is meant by liquidity trap?

Savings are high, and interest rates are low. Interest rates cannot go any lower.

Which of the following refers to a financial market?

Banking

Which of the following institutions fulfills the transfer role of directing funds from savers to borrowers?

Banks

Which of the following would be categorized as money?

Coins

Which of the following best fulfills the transfer role of directing funds from investors to corporations?

Equity markets

What is a key policy issue for the Fed?

Inflation

Which of the following is one of the major defects of commodity money?

Its worth as a commodity may be greater than its worth as money, ensuring that it ceases to function as a medium of exchange.

The Federal Reserve System (Fed) loosening or tightening the money supply through purchasing or selling securities on a secondary market for government securities is an example of __________.

government use of open-market operations (monetary policy tools)

The Fed can target the inflation rate by adjusting the money supply.

inflation