Exam 16: The Monetary System: Part B

Federal Reserve governors are given long terms to insulate them from politics.

Members of the Board of Governors of the Federal Reserve System are appointed for life.

If the Fed buys bonds in the open market,the money supply decreases.

Under a fractional-reserve banking system,the money supply cannot change without any action from the Federal Reserve.

Money is the only asset that functions as a store of value.

Sandra routinely uses currency to purchase her groceries.She is using money as a medium of exchange.

Under a 100-percent-reserve banking system,banks do not influence the supply of money.

In an economy that relies on barter,trade requires a double-coincidence of wants.

Gary's wealth is $1 million.Economists would say that Gary has $1 million worth of money.

Fractional reserve banking is a system where banks must hold an amount of cash based on a percentage of its loans.

According to economists,"money" means the same thing as "wealth".

M2 is both larger and less liquid than M1.

Just after the terrorist attack on September 11,2001,the Fed stood ready to lend financial institutions funds.When the Fed did this,it was acting in its role of lender of last resort.

The money multiplier equals 1/(1 - R),where R represents the reserve ratio.

The Federal Reserve primarily uses open-market operations to change the money supply.

The Federal Reserve was created in 1913 after a series of bank failures in 1907.

Money allows people to specialize in what they do best,thereby raising everyone's standard of living.