Chapter 10 Study Set

question

Durability
answer

The fact that money can withstand the wear and teat that comes from being used over and over again is a measure of its
question

Smaller units of value
answer

Divisibility means that money can be easily divided into
question

Representative money can be converted into gold or silver; fiat money cannot
answer

The difference between representative money and fiat money
question

uniformity
answer

Two units of the same type of money must be the same in terms of what they will buy, which is the principle of
question

if we could not carry money with us, it would be hard to use
answer

Why is portability an important characteristic of money?
question

Representative
answer

Which type of money has no value of its own but is valuable because it can be exchanged for something else of value?
question

It is often not portable, durable or divisible
answer

Why would commodity money be hard to use in most societies?
question

A centralized banking system
answer

In the early years of the United States, the Federalists favored
question

state-chartered banks
answer

During the Free Banking Era, banking in the United States was dominated by which of the following?
question

The banking system was taken off the gold standard
answer

As part of the nation’s recovery from the Great Depression of the 1930’s the banking system was reformed in which of the following ways?
question

it can slow economic growth by limiting the amount of money in circulation
answer

What is one important disadvantage of the gold standard?
question

The government created the Federal Deposit Insurance Corporation
answer

What is one banking reform the government made during the Great Depression?
question

losses from risky loans
answer

What was one cause of the Savings and loan crisis in the 1980s?
question

A cooperative lending institution for a particular group
answer

What is a credit union?
question

By paying out less in interest on deposits than it earns in interest on loans
answer

How does a bank make most of its profit on its business?
question

They are available whenever the account holder wants them
answer

Why are funds in checking accounts called demand deposits?
question

liquidity
answer

What is an important characteristic of the M1 money supply?
question

Banks keep some money on hand and lend out the rest
answer

What is fractional reserve banking?
question

interest it receives on loans to customers
answer

What is the largest source of income for banks?
question

sub-prime mortgages
answer

Which of the following has contributed to a recent banking crisis?
question

Comparing camera prices at different stores before buying one
answer

Which of the following is an example of money as a unit of account?
question

customers do not lose money if a bank fails
answer

The main purpose of the FDIC is to make sure that
question

Customers withdraw more money than the bank has on hand
answer

What happens during a bank run?
question

The government must control the money supply
answer

What condition is necessary for a fiat money system to work?
question

it was used as currency
answer

In the 1800’s people in mining towns in the west often paid for goods with gold nuggets or gold dust. What was the function of gold?

Get instant access to
all materials

Become a Member