question

What monetary standard does our money system currently follow?

answer

Inconvertible Fiat *****

question

To be successful, money must be _____

answer

-Portable -Durable -Divisible -Limited in Supply *****

question

Fraudulent banks that printed large amounts of currency in remote areas to make the redemption of their currency difficult were known as _______ Banks

answer

Wildcat Banks *****

question

A special type of money used in colonial times consisted of shells strung together called _____

answer

Wampum *****

question

Characteristics of a good medium of exchange include:

answer

Portable, divisible, and stable in value NOT ABUNDANT IN SUPPLY *****

question

Each of the seven full time members of the Fed's Board of Governors

answer

Is appointed by the president with approval by the senate for a 14-year term *****

question

The group that meets about 8 times a year to decide the course of action that the Fed should take to control the money supply is the

answer

Federal Open Market Committee *****

question

There are _____ Federal Reserve District Banks located in the United States

answer

12 *****

question

Who is the current chairman of the Federal Reserve Board of Governors?

answer

Janet Yellen *****

question

District 11 Federal Reserve Bank is located in which U.S. city?

answer

Dallas *****

question

The Fed might raise the discount rate in order to _____

answer

discourage borrowing *****

question

This is true concerning the Fed's open-market operations

answer

Buying and selling government securities, or open market operations, is a monetary policy tool used by the Fed to control the money supply *****

question

The _____ is the interest the Fed charges on loans to financial institutions such as banks and is one tool of monetary policy

answer

Discount Rate *****

question

This statement is false

answer

To control the money supply the Fed has most often used adjustments to the reserve requirement. it's their main tool of monetary policy! *****

question

Low interest rates, high employment, and a growing money supply, are characteristics of this type of monetary policy

answer

Easy Money *****

question

The three main tools of monetary policy are:

answer

-Discount Rate -OMO's -Reserve Requirement *****

question

If the reserve requirement is 20% and you deposit $100 in the bank, what are the excess reserves from the deposit?

answer

$80 *****

question

Which district bank president always serves as a voting member on the FOMC?

answer

NY *****

question

Where does the FOMC meet to discuss monetary policy at least 8 times per year?

answer

Washington DC *****

question

In 1913, which U.S. president signed the Federal Reserve System into law as the nation's first true central bank?

answer

Wilson *****

question

Credit cards are accepted as cash by most stores

answer

True *****

question

Most credit cards have a credit limit

answer

True *****

question

If I pay my credit card in full by the due date, I will not have to pay any interest

answer

True *****

question

You should never pay the full amount of your credit card, only the minimum required by the company

answer

False *****

question

Credit cards offer rewards programs like cash back or gift cards for making purchases on them

answer

True *****

question

any substance that functions as a medium of exchange, a medium of value, and a store of value is ______

answer

Money

question

money is generally accepted as payments for goods and services. as society became more complex, trading goods for other goods and services became more difficult

answer

Medium of Exchange

question

money expresses worth in terms that most understand: consumers trade using money as common denominator (price tag)

answer

Measure of Value

question

goods and/or services can be easily converted to money, which can easily be stored until a later time

answer

Store of Value

question

money that has an alternative use as a commodity (compressed brick tea leaves)

answer

Commodity Money

question

money by government decree (coins used in Asia minor in 7th century BC

answer

fiat money

question

the use of money became accepted because it served in everyones best interest

answer

Social Convention

question

money with an alternative use as a commodity (gun powder, musket balls, corn, hemp TOBACCO)

answer

Commodity Money

question

form of currency the Warraganset Native Americans mad out of white conch and black mussel shells

answer

Wampum

question

states allowed individuals to print their own money

answer

Paper Currency

question

money in the form of coins usually made from silver or gold

answer

Specie

question

ingots or bars of precious metals

answer

Bullion

question

standard unit of currency as a country's money system

answer

Monetary Unit

question

Portable (easily transferred), Durable (ability to last), Divisible (can be broken into units), Stable (available but limited)

answer

Characteristics of money

question

a bank that receives its charter to operate from a state government

answer

State Bank

question

privately owned an operated, larger than state banks, Federal charter rather than state charters

answer

The 1812 Bank of the United States (exception to the state bank)

question

printed paper currency

answer

Money Supply

question

banks that over-printed their currencies; their money was not backed up by gold and silver reserves

answer

Wildcat Banks

question

each bank issued different currencies, temptation to issue too many notes (print more money than they have)

answer

Currency Problems

question

1,600 banks issuing 10,000 kinds of paper money, and the issued money was not all backed up by gold and silver

answer

End of the Civil War

question

one currency dominated during the years 1861-1900 and it became the main monetary standard of the time congress printed money to finance the civil war

answer

Greenback Standard

question

congress authorized printing of $60 mofnotes called demand notes (signed by a clerk) in what year?

answer

1861

question

flat currency that must be accepted in payment for debts

answer

Legal Tender

question

both sides of demand notes were printed with green ink to distinguish them from state notes circulation

answer

Greenbacks

question

congress passed the Legal Tender Act which gave the government right to print $150 million with no gold or silver backing

answer

United States Notes

question

As war dragged on, number of greenbacks increased, people feared that currency might become worthless and avoided greenbacks

answer

National Currency

question

consists of financially sound and rigorously inspected private banks

answer

National Banking System (NBS)

question

banks that received charters from national government, gave people confidence in system and currency

answer

National Banks

question

uniform in appearance and backed by U.S. government bonds

answer

National Bank Notes/Currency (gold certificates,silver certificates,treasury coin notes)

question

monetary standard under which the basic unit of currency is equivalent to, and can be exchanged for, a set amount of gold could exchange all types of national currency for gold at the treasury whenever they wanted to

answer

The Gold Standard Act of 1900

question

security of converting to gold prevents government from printing too much paper

answer

Advantages of the Gold Standard

question

growing economy needs growing money supply which leads to growing gold stock converting currency to gold which leads to draining the government of gold reserves

answer

Disadvantages of Gold Standard

question

U.S. and its money standard is inconvertible because it cannot be converted into gold or silver by its U.S. citezens

answer

Inconvertible Fiat Money Standard (1934-Present)

question

it is fiat money standard because the government decree declared dollars legal money, giving it _______

answer

Intrinsic Value

question

12 banks Dallas is home base Headquarters are in DC

answer

Structure of the Fed

question

banks hat belong to the Federal Reserve System

answer

Member Banks

question

contribute financial capital and in return receive stock in Fed. pays individuals

answer

Ownership

question

commercial banks own fed not federal government itself

answer

Private

question

district presidents determine makeup of boards

answer

Elect directors for 12 district banks

question

appoints 7 members of fed Board of Governors to 14 year terms

answer

President of the United States

question

Washington DC

answer

The board of Governors work out of here

question

direct and control the activities of the Fed

answer

role of the Board of Governors

question

SETS general policies for member banks to follow REGULATES operations of state chartered members commercial banks CONDUCTS monetary policy REPORTS to congress 1/year and monthly bulletins

answer

The Board of Governors do this for the Fed

question

MAKES decisions about growth of money supply CONTROLS interest rate level

answer

Federal Open Market Committee (FOMC)

question

7 members of the BoG 5 district reserve bank presents ( 1 year rotating terms)

answer

Make-up of the FOMC

question

meets 8 times/year in DC discusses country's economy cost and availability of credit decisions are secret and released several weeks after meetings

answer

FOMC Roles

question

offers advice and feedback on the overall health of the economy to Federal Board

answer

12 district banks

question

12 members appointed by member banks in region but has little impact on the daily operations of the Fed

answer

Federal Advisory Council (FAC)

question

Fed is responsible for monitoring the reserves of its state chartered member banks while other regulatory agencies monitor reserves of non member makes and other depository of the fed

answer

States Member Bank Supervision

question

banks use them to clear checks fed uses them to control the size of money supply

answer

State Member Banks

question

-fed has broad legislative authority over ban holding companies- a form of corporation that owns one or more banks -attempted to evade banks restrictions put on banks during great depression bc they weren't banks but corporate structure -fed regulates holding company

answer

Holding Companies

question

in 1993 foreign banks operated more than 500 branches and agencies in the U.S.

answer

International Operations

question

Controls 25% of all banking assets in the U.S.

answer

International Operations

question

branches are examined annually power to terminate domestic operations

answer

Fed's authority over International Operations

question

Fed authorizes and supervises international operations of U.S. member bans and holding companies which is _____ branckes

answer

800

question

Fed Comptroller of Currency FDIC

answer

Bank mergers requires approval of the appropriate federal banking authority

question

clearing checks process that makes extensive use of reserves in the banking systems

answer

major service the fed performs in check clearing

question

require sellers to complete and make accurate disclosers to people who buy on credit

answer

Truth-in-Lending Laws

question

extended to millions of individuals by corporations, retail stores, auto mobile decriers, banks, and lending institutions

answer

Regulation-z-truth-in-lending disclosers

question

made up of the federal reserve notes--- fiat paper money issued by federal reserve banks and printed at the bureau of engraving and printing

answer

Paper component of the money supply

question

stored in fed's district banks and sent to member banks upon request

answer

Currency

question

metallic forms of money, pennies, nickels, and dimes, made at the bureau of the mint and sent to district banks for storage

answer

Coins

question

minimum deposits left with a stockbroker to be used as a partial payment on other securities

answer

Margin Requirements

question

an investor has to put up at least half the money needed to buy eligible stocks and bonds has been set as high as 80% left to feds' discretion

answer

Margin Requirement setting a 50% minimum for stocks and bonds

question

monitors stock market activity and publishes a list of stocks that are eligible for margin loans

answer

Margin Requirements

question

involves controlling the expansion and/or contraction of the supply to influence the cost and availability of credit, thereby influencing economic activity

answer

Monetary Policy

question

RESERVE REQUIREMENT OPEN MARKET OPERATIONS DISCOUNT RATE MORAL SUASION SELECTIVE CREDIT CONTROLS

answer

5 tools of Monetary Policy

question

the fed allows the money supply (MS) to grow and interest rates (IR) to fall which normally stimulates the economy

answer

Easy Money

question

the fed restricts the growth of the MS which drives IR up

answer

Tight Money

question

spend more, increase growth

answer

Low interest rates

question

spend less, slows growth

answer

High interest rates

question

requires banks and other depository institutions to keep only a fraction of their deposits in the form of reserves

answer

Fractional Reserve System

question

rule stating that a percent of every deposit be set aside as legal reserves

answer

Reserve Requirement

question

coins, currency, and deposits used to fulfill the reserve requirement

answer

Legal Reserves

question

reserves in excess of reserve requirement can be lent to others who may want a loan

answer

Excess Reserves

question

more money loaned, MS grows

answer

when the fed lowers the fed requirement

question

less money loaned, MS shrinks

answer

when the fed raises the reserve requirement

question

buying and selling of government securities in financial markets

answer

Open Market Operations (OMOs)

question

interest rates, monetary growth, trading desk

answer

FOMC conducts OMOs to impact

question

physical location at the feds NY district bank where the buying and selling actually takes place

answer

Trading Desk

question

adds excess reserves to system, MS grows

answer

when the fed buys bonds

question

contracts excess reserves from system, MS shrinks

answer

when the fed sells bonds

question

the interest rate the fed charges on the loans to other financial institutions

answer

Federal Funds Rate unexpected drop in MBRs and seasonal demand for loans

question

tellers window at fed that depository institutions used to borrow MBRs

answer

Discount Window

question

property or other security used to guarantee payment of loann

answer

Collateral

question

allows more borrowing, MS grows

answer

when the fed lowers the discount rate

question

discourages borrowing, MS shrinks

answer

when the fed raises the discount rate

question

the lowest rate of interest commercial banks charge their best customers; banks usually adjust their prime rate up or down whenever the fed changes the discount rate

answer

Prime Rate

question

rule pertaining to loans for specific commodities and purpose (rarely used)

answer

Selective credit controls (minimum down payments on cars during WWII)

ECON CH 14

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