ECON 2035 Chapter Notes - Chapter 2: Savings Account, Money Supply, Payment System

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2 Jul 2014

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Chapter 2: what is money, money- class of assets that serves as an economy"s medium of exchange, money- portion of our wealth a that is used and generally excepted for payment of goods and services o. Wealth (saving/investment, cash) stock (how much money you have at any point in time) A lot of income a flow variable. Function of money: medium of exchange what actually changes hands, unit of account (prices of things, store of value portion of our assets. A store of value- form in which wealth can be held. Types of money: commodity money- valuable good that serves as the medium of exchange. Fiat money money with no intrinsic value. Alternatives to a national currency: dollarization-use of foreign currency (often u. s. dollars) as money, currency board- institution that issues money backed by a foreign currency, currency union- group of countries with a common currency.

Related Questions

1. Which of the following both increase the money supply?

an increase in the discount rate and an increase in the interest rate on reserves
an increase in the discount rate and a decrease in the interest rate on reserves
a decrease in the discount rate and an increase in the interest rate on reserves
a decrease in the discount rate and a decrease in the interest rate on reserves

2. In the U.S., the average adult holds about $3,700 in

currency.
wealth.
M1.
M2.

3. The measure of the money stock called M1 includes

wealth held by people in their checking accounts.
wealth held by people in their savings accounts.
wealth held by people in money market mutual funds.
everything that is included in M2 plus some additional items

4. When the Fed decreases the discount rate, banks will

5. Reserve requirements are regulations concerning

the amount banks are allowed to borrow from the Fed.
the amount of reserves banks must hold against deposits.
reserves banks must hold based on the number and type of loans they make.
the interest rate at which banks can borrow from the Fed.

6. When we say that trade is roundabout we mean that

people sometimes trade goods for goods.
trades require a double coincidence of wants.
currency is accepted primarily to make further trades.
people must spend time searching for the products they wish to purchase.

7. Values of Assets

Asset	Amount in $Billions
Small-time deposits	780
Large time deposits	1,700
Demand deposits	450
Other checkable deposits	370
Savings deposits	4950
Traveller's checks	5
Money market mutual funds	740
Currency	880
Miscellaneous categories of M2	50

Refer to Value of Assets. What is the value of M1 in billions of dollars?

1705
2485
6295
7075

8. In 1991, the Federal Reserve lowered the reserve requirement from 12 per cent to 10 per cent. Other things the same this should have

increased both the money multiplier and the money supply.
decreased both the money multiplier and the money supply.
increased the money multiplier and decreased the money supply.
decreased the money multiplier and increased the money supply.

9. Consider four survivors on an island.

Rupert	has machete	wants fishing spear
Amber	has cooking pot	wants fishing spear
Rob	has fishing spear	wants machete
Tom	has cooking pot	wants machete

Which of the following pairs of survivors has a double-coincidence of wants?

Rupert with Amber, and Rob with Tom
Amber with Tom
Rupert with Rob
None of the above is correct.

10. Economists use the term money to refer to

all wealth.
all assets, including real assets and financial assets.
all financial assets, but not real assets.
those types of wealth that are regularly accepted by sellers in exchange for goods and services.

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ECON 2035 Chapter Notes - Chapter 2: Savings Account, Money Supply, Payment System

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