Economics Unit 4

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

True

American colonists and Native Americans used tobacco as their medium of trade. A)Commodity Money B)Representative Money C)Fiat Money

A)Commodity Money

Ancient Rome used to pay their soldiers with salt. A)Commodity Money B)Representative Money C)Fiat Money

A)Commodity Money

British colonies in the Caribbean used rum as a medium of exchange. A)Commodity Money B)Representative Money C)Fiat Money

A)Commodity Money

In the aftermath of the devastation of World War II, cigarettes and gasoline were used in parts of Europe to purchase goods A)Commodity Money B)Representative Money C)Fiat Money

A)Commodity Money

Which form of currency would be the easiest for a government to create more of without limit? A)Fiat Money B)Commodity Money C)Representative Money

A)Fiat Money

The main characteristic of commodity money that makes it differ from other types of money is that A)has an inherent use and value separate from its role as money B)is used by modern banks, while other money types were used in the past C)can be exchanged for gold or silver with the government D)can easily be both carried in large quantities and divisible

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

One of the most important effects caused by people saving their money in banks is that banks _____. A)loan this money out to individuals and businesses who invest it and grow the economy B)take responsibility of the money so that bank customers face less tax liabilities C)keep this money in reserve to ensure that the government has access to enough currency to pay off debts. D)use the vast majority of the money to build new bank branches and hire employees

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

The Federal Reserve issues Federal Reserve Notes, which are _____. A)the single paper currency valid in the United States B)tax bills that American workers pay each paycheck C)orders for weak banks to come under government ownership. D)bonds that the government sells to pay off the debt

A)the single paper currency valid in the United States

Which chart correctly identifies the correct hierarchy of the Federal Reserve System? A) Member Banks 12 Federal Reserve Banks Federal Reserve Board B) Federal Reserve Board 12 Federal Reserve Banks Member Banks C) 12 Federal Reserve Banks Federal Reserve Board Federal Reserve Banks D) Federal Reserve Board Member Banks 12 Federal Reserve Banks

B) Federal Reserve Board 12 Federal Reserve Banks Member Banks

A certificate allows the bearer to claim a new car. A)Commodity Money B)Representative Money C)Fiat Money

B)Representative Money

A customer writes several checks at the mall to pay for their purchases. A)Commodity Money B)Representative Money C)Fiat Money

B)Representative Money

What problem did the introduction of Federal Reserve Notes help fix with the banking system? A)Money was not easily divisible into smaller denominations until their introduction. B)They give the United States a single currency as opposed to every bank producing their own currency notes. C)Banks were unable to loan money out to customers before their introduction. D)They gave the United States a form of paper currency for the first time.

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

In the past, a United States dollar bill was representative money, which refers to how_____. A)it could legally be spent by only United States citizens B)its value was based on the ability to exchange it for gold or silver C)Congressional representatives had to authorize each printing D)it had a separate economic use other than as currency

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

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? A)$10 million B)$100 million C)$90 million D)$110 million

C)$90 million

Which statement best describes money's function as a unit of account? A)Money's rarity gives it value that all people want. B)Everyone must purchase goods and services with money, and may not use other payments. C)All goods and services in the United States are priced with dollars, allowing their values to be compared. D)Money can be exchanged for a fixed amount of gold or silver.

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

Early American colonies produced notes that their governments mandated could legally be used to pay taxes. A)Commodity Money B)Representative Money C)Fiat Money

C)Fiat Money

In 18th century Sweden, the government mandated that businesses must accept paper money that could not be exchanged for precious metals. A)Commodity Money B)Commodity Money C)Fiat Money

C)Fiat Money

The American dollar today is used to trade all over the world. A)Commodity Money B)Representative Money C)Fiat Money

C)Fiat Money

The FDIC's (Federal Deposit Insurance Corporation) main purpose is to A)finance the military during times of war. B)determine the amount of bonds the Fed sells to banks. C)assure Americans that their bank deposits are safe. D)put private banks under government control.

C)assure Americans that their bank deposits are safe.

Match each term with its correct definition: National Banking Act 1863

Created system of banks chartered by the national government that would create a uniform currency for the United states

One advantage that money has over bartering is its role as a medium of exchange, which refers to how _____. A)valuable commodities like precious metal can be used as money B)money can be used to purchase goods both large and small C)government can mandate the use of money as currency D)all members of society will accept it as payment for a trade

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

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. A)representative B)fiscal C)fiat D)commodity

D)commodity

Your community bank actually creates money and increases the money supply whenever it _____. A)prints new paper bills to replace old and worn currency B)sells its customers investments like stocks and bonds that earn interest C)arranges for its customers to pay their tax debts on time D)loans out money that its customers have deposited with them

D)loans out money that its customers have deposited with them

Today, American paper currency is fiat money, which refers to how _____. A)it has an alternate economic use other than as currency B)it had a separate economic use other than as currency C)it can legally be exchanged for gold or silver D)the government mandates that it must be accepted

D)the government mandates that it must be accepted

Match each term with its correct definition: Bank of the United States (BUS)

First bank in the United States charted by national government

Match each term with its correct definition: Alexander Hamilton

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

Match each term with its correct definition: Thomas Jefferson

Founding father opposed to creating a national, banking system

Match each term with its correct definition: Financial- Intermediary

One of the main functions that banks serve. Connects people who want to save their money with people who want to borrow

Match each term with its correct definition: Federal Deposit Insurance Corporation (FDIC)

Provides government-backed guarantee that bank customer's accounts are safe and will be reimbursed in event of bank failure

Match each term with its correct definition: Bank Run

Situations that occurred before modern banking reforms that led to banks going bankrupt as their customers panicked and tried

Match each term with its correct definition: Savings-Economic Growth Relationship

Term referring to how the more money that is saved in banks leads to more banks loans that cause more spending and jobs

Match each term with its correct definition: Federal Reserve (Fed)

The United States' current central bank that oversees and regulates the nation's banks

Match each term with its correct definition: Federal Reserve Note

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