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14 Questions

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Creating Money in Economics

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Questions and Answers

What is the primary function of money in an economy?

To store value

To earn interest

To serve as a medium of exchange (correct)

To reduce risk

Which institution is primarily responsible for creating money in the United States?

Federal Reserve System (correct)

Internal Revenue Service (IRS)

Federal Deposit Insurance Corporation (FDIC)

Department of the Treasury

What is the consequence of having too little money in an economy?

High inflation

Increased employment

Rapid economic growth

Constrained economic growth (correct)

What is the purpose of a check in a financial transaction?

To transfer money to another party Signup and view all the answers

What is the advantage of using electronic funds transfers?

They can be made at automated teller machines (ATMs) Signup and view all the answers

Why do individuals and businesses prefer to hold money in depository institutions?

To reduce risk Signup and view all the answers

What is the primary function of financial institutions in terms of savings?

To accumulate or gather individual savings Signup and view all the answers

What is the consequence of having too much money in an economy?

Increased prices of goods and services Signup and view all the answers

What is one of the primary reasons people place small cash amounts into depository institutions?

For safekeeping Signup and view all the answers

Who can avail loans from financial institutions?

Businesses, consumers, and governmental units Signup and view all the answers

What distinguishes some financial institutions from others based on the type of loans they make?

Some make all types of loans, while others specialize Signup and view all the answers

In what markets are new financial instruments and securities created and sold?

Primary securities market Signup and view all the answers

What is a function of financial institutions mentioned in the text?

Lending and investing Signup and view all the answers

What method do financial institutions use to attract deposits?

Advertising campaigns and promotional activities Signup and view all the answers