1. Money and the Federal
Reserve System
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2. barter
The direct exchange of one
good for another good,
rather than for money
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3. What is the problem
with barter?
It requires a
coincidence of wants
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4. money
Anything that serves as
a medium of exchange,
unit of account, and
store of value
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5. advantage of money
simplifies and therefore
increases market
transactions
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6. functions of money
• Medium of exchange
• Unit of account
• Store of value
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7. medium of exchange
widely accepted in
exchange for goods and
services
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8. unit of account
(standard of value)
provide a common
measurement of value of
goods and services
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9. store of value
ability of money to
hold value over time
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10. Are credit cards money?
No, credit cards fail to
meet the store-of-value
criterion and are
therefore not money
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11. What are other
properties of money?
Money must be …
• portable
• divisible
• uniform
• acceptable
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12. Is our money backed by
gold or silver?
No, our paper money was
exchangeable for gold until
1934, and in 1963 Congress
removed the right to
exchange $1 bills for silver
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13. fiat money
Money accepted by
law and not because
of redeemability or
intrinsic value
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14. What makes our dollar
bills fiat money?
All our bills claim that “This
note is legal tender for all
debts public and private”
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15. legal tender
Legally dollar bills
cannot be refused as
payment for a debt
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16. currency
Money, including coins
and paper money
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17. the Federal Reserve System
The 12 central banks that
service banks and other
financial institutions
within each of the Federal
Reserve districts
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18. 18

19. Ben Bernanke
Chairman of the Board of
Governors of the Fed
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20. What does a federal
reserve bank do?
• Controls the money supply
• Clears checks
• Supervises and regulates banks
• Maintains and circulates currency
• Protects consumers
• Maintains federal government
checking accounts and gold
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21. What is the Federal
Deposit Insurance
Corporation?
The FDIC is a government
agency established in
1933 to insure
commercial bank deposits
up to a specified limit
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