Why does inflation make money an imperfect store of value

Assignment Help Macroeconomics

Reference no: EM133295034

Assignment:

Questions:

1. Why does inflation make money an imperfect store of value?

2. Why are travelers' checks classified as money, but credit cards are not?

3. What really gives money value?

4. Why do banks keep excess reserves to a minimum?

5. Why does the money supply grow by an amount much greater than the initial amount of a loan made by a bank?

6. Note the difference between the federal funds rate and the prime rate.

7. The Fed has been trying to help the economy out of this inflationary spiral. What policies has the Fed pursued? What is the big risk to the economy of higher interest rates?

8. Interest rate hikes are one policy used to fight inflation. What else can Governments do?

9. .Why might a strengthening of the U.S. Dollar be a good thing?

10. Why does contractionary monetary policy cause interest rates to rise?

11. Why does expansionary monetary policy causes interest rates to drop?

Multiple choice

1. M1

A. includes small time deposits.

B. includes credit cards.

C. is the narrowest definition of the money supply.

D. is the sum of currency plus traveler's checks.

2. Which of the following is NOT included in M1 or M2?

A. checking account balances

B. credit card balances

C. traveler's checks

D. currency in circulation outside of commercial banks

3. Which one of the following statements is true?

A. A bank's reserves can only be kept as cash in its vault.

B. A bank's assets plus its liabilities equals must equal zero.

C. Demand deposits are assets of a bank.

D. Assets generate income for a bank.

4. The nominal interest rate is determined in the

A. exchange market.

B. money market.

C. stock market.

D. bond market.

Reference no: EM133295034

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