Money and the Federal Reserve: Mastery Test

A small community uses cattle as money. A man from the community traded five cows for a plot of farmland. Which characteristic of his money allowed him to make this transaction?

acceptability

Mario paid three bushels of rice for three boxes of wool at the market. What type of money did Mario use for this exchange?

commodity

Identify the type of money used for the transaction. Luke paid six apples for two dozen eggs.

commodity money

Identify the type of money used for the transaction. Chris bought a bagel with coins issued by the government.

fiat money

Which of the following is a characteristic of money?

limited supply

The GDP of a country hasn't improved in the past three years. The central bank decided to take a measure that will increase the amount of money people spend on goods and services. Which step should the central bank take?

reduce interest rates

What are Reserve Banks? Reserve Banks are __________that help the ________ carry out its duties.

regional banks central banks

During wartime, a small country issued certificates to the public to raise money. Each certificate promised to pay the holder a certain amount in silver. After the war was over, the population continued exchanging these certificates instead of converting them to silver. What type of money did this economy use?

representative

Identify the type of money used for the transaction. Karen bought a bike by exchanging it for her silver receipt.

representative money

Who makes decisions regarding changes in the discount rate?

the Board of Governors

What is the federal funds rate?

the interest rate that banks charge each other for overnight loans

examples of expansionary monetary policy

1. reducing the required reserve ratio 2. reducing the federal funds rate

Examples of contractionary monetary policy

1. selling government securities 2. increasing the discount rate