Economics Chapter on Money and Finance

<p>250 (D)</p> Signup and view all the answers

<p>7% (A)</p> Signup and view all the answers

<p>Intrinsic value (D)</p> Signup and view all the answers

<p>Savings deposits (C)</p> Signup and view all the answers

<p>Screen and evaluate the credit of potential borrowers (A)</p> Signup and view all the answers

<p>The ability to convert an asset into cash quickly (C)</p> Signup and view all the answers

<p>Bond prices fall (A)</p> Signup and view all the answers

<p>Bonds come with no risks involved. (A)</p> Signup and view all the answers

<p>Riskier assets generally offer higher returns (D)</p> Signup and view all the answers

<p>Withdrawals are tax-free (D)</p> Signup and view all the answers

<p>Supply and demand for borrowed funds (C)</p> Signup and view all the answers

<p>62 (D)</p> Signup and view all the answers

<p>Large savings accounts (D)</p> Signup and view all the answers

<p>The nature of the asset's market (C)</p> Signup and view all the answers

<p>Open Market Operations (B)</p> Signup and view all the answers

<p>Providing nationwide payment systems (D)</p> Signup and view all the answers

<p>401(k) (A)</p> Signup and view all the answers

<p>Investments grow faster due to interest on both the principal and accumulated interest (B)</p> Signup and view all the answers

<p>Interest rates decrease (C)</p> Signup and view all the answers

<p>Raising reserve requirements (A)</p> Signup and view all the answers

<p>By adjusting reserve requirements for banks (B)</p> Signup and view all the answers

<p>Decreases the money supply (B)</p> Signup and view all the answers

<p>Loanable funds increase; interest rates decrease (C)</p> Signup and view all the answers

<p>Discourages borrowing and spending (B)</p> Signup and view all the answers

<p>Bank reserves will decrease (C)</p> Signup and view all the answers

<p>Encourages lending and increases money supply (C)</p> Signup and view all the answers

Money is a medium of exchange that is widely accepted, divisible, durable, and easy to determine its value.

Money serves as a medium of exchange, a unit of account, and a store of value.

The ease and speed with which an asset can be converted into cash.

The narrowest measure of money supply, encompassing currency in circulation and checkable deposits.

A broader measure of money supply, encompassing M1 plus savings deposits, money market accounts, small time deposits, and retail money market funds.

A market where savers supply funds and borrowers demand funds, determining the real interest rate.

Organizations that facilitate financial transactions, including providing credit, reducing costs, and diversifying assets.

Debt securities that offer a return in the form of interest payments and principal repayment at maturity.

The value of a bond, which is inversely related to interest rates. When interest rates rise, bond prices fall.

The amount of money that will be repaid to the bondholder at maturity.

Generally, investments with higher risk offer the potential for higher returns.

A tax-advantaged retirement savings plan sponsored by your employer. You contribute pre-tax money and earn tax-deferred returns.

A retirement savings account where contributions may be tax-deductible, but withdrawals are taxed as income.

A retirement savings account where contributions are made with after-tax income, but withdrawals are tax-free.

Interest earned not only on the initial principal but also on accumulated interest.

A government program funded by FICA taxes to provide retirement income, disability benefits, and survivor benefits.

The price of a bond is determined by dividing the annual interest payment by the new market interest rate.

When interest rates rise, the value of a bond decreases because new bonds offer a higher return.

The interest rate banks charge each other for overnight loans.

A policy implemented by a central bank to encourage economic growth, typically by lowering interest rates and increasing the money supply.

A model that relates the money supply (M), velocity of money (V), price level (P), and real output (Q). M x V = P x Q.

A policy aimed at slowing down economic growth by decreasing the money supply and raising interest rates, discouraging borrowing and spending.

The interest rate the Federal Reserve pays banks on their reserves held at the Fed. Higher IORB encourages banks to hold reserves, reducing lending and decreasing the money supply.

The interest rate at which commercial banks can borrow money directly from the Federal Reserve. Lowering the discount rate encourages borrowing, increasing the money supply.

The buying and selling of government securities (bonds) by the Federal Reserve to influence the money supply. Buying securities increases reserves, while selling reduces them.

The percentage of a bank's deposits that must be held in reserve, not loaned out. Lowering reserve requirements releases more money for lending.

The Fed doesn't directly control interest rates, but it influences them through its tools. Expansionary policy lowers interest rates, while contractionary policy raises them.

Monetary policy aims to balance economic growth, stable prices (inflation), and moderate interest rates.