ECON-1010 Chapter Notes - Chapter 13: Commodity Money, Barter, Reserve Requirement

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emeraldmallard514

26 Nov 2016

School

Vanderbilt University

Department

Economics

Course

ECON-1010

Professor

Driskill Robert

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ECON-1010 Full Course Notes

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In the short run, when prices are largely xed, an increase in money will raise total demand and output. In the long run, an increase will lead to in ation. Money - any items that are regularly used in economic transactions or exchanges and accepted by buyers and sellers. Any item that buyers give to sellers when they purchase goods and services. Barter - the exchange of one good or service for another. Double coincidence of wants - the problem in a system of barter that one person may not have what the other desires. A standard unit in which prices can be stated and the value of goods and services can be compared. The property of money that holds that money preserves value until it is used in an exchange. Money is actually an imperfect store of value because of in ation. Commodity money - in which the actual money is a commodity, such as gold or silver.

Related Questions

Money is often used to purchase items in society, but bartering was common in the past. Bartering is the trading of one good or service for another good or service.

Explain your experiences with bartering. List at least 1 advantage and 1 disadvantage to bartering.

Most developed countries in the world use flat money. This means that their money is not backed by gold or silver. The value is related to only the faith in the country that backs it. The US has used flat money since the 1970s.

Why do you think most developed countries use flat money? Would it be practical to switch back to a commodity (like gold or silver) backed money system? Why or why not?

Use at least two of the following terms in your answer: Asset

Flat Money

Store of value

Unit of account

Medium of exchange

lavenderkoala678

Question 2 (3 points) If an individual bank receives $100,000 in new deposits and the required reserve ratio is 10 percent, the bank must keep the following amount of required reserves with the Fed?

$90,000.

$1,000,000. '

Zero.

$10,000.

Question 3 (3 points) Assume that the Fed purchases $10 million in bonds from a bank, the monetary base will:

Increase by $10 million.

Remain unchanged.

Decrease by $10 million.

Increase by $5 million.

Question 4 (3 points) When we say that money has a function as a medium of exchange, this implies that:

Money must be in the form of a precious metal such as gold.

Money must be set at a fixed exchange rate in international currency markets.

Money is backed by the gold standard.

Money is used to purchase goods and services rather than resorting to barter.

Question 5 (3 points) Which of the following is not considered an asset for a bank:

Customer deposits.

U.S. government treasury bills.

Corporate loans.

U.S. government-issued debt.

amberbeaver601

1. The market in which loans are bought and sold is called the:

		loan market.
		money market.
		secondary loan market.
		primary loan market.

2. Which of the following is omitted in a barter transaction?

		trade
		medium of exchange
		store of value
		money

3. If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.

		balance of trade
		double coincidence of wants
		convenience of exchange
		division of labour

4. If loans become far less available, then sectors of the economy that ______________ like business investment, home construction, and car manufacturing can be dealt a crushing blow.

		depend on borrowed money
		typically generate extraordinary gains
		make loans to financial capital markets
		failed to diversify risk

5. Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at the market value of $400 million, what will its total assets equal?

		$110 million
		$710 million
		$480 million
		$510 million

6. Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

		medium of exchange
		unit of account
		store of value
		unit of exchange

7.Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?

		savings
		money
		M2
		M1

8. Which of the following institutions determines the quantity of money in the economy as its most important task?

		U.S. Department of the Treasury
		Federal Open Market Committee
		Central Bank
		Federal Reserve Board of Governors

9. How are the specific interest rates for the lending and borrowing markets determined?

		U.S. Treasury Department Board policy
		by the forces of supply and demand
		through open market operations
		by altering the discount rate

10.When the central bank lowers the reserve requirement on deposits:

		the money supply increases and interest rates decrease.
		the money supply and interest rates decrease.
		the money supply and interest rates increase.
		the money supply decreases and interest rates increase.

taupeant891

ECON-1010 Chapter Notes - Chapter 13: Commodity Money, Barter, Reserve Requirement

ECON-1010 Full Course Notes

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