Chapter 14 Quiz

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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.


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