经济学资料（英文版）经济学课本答案27.docVIP

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. The three functions of money are: (1) medium of exchange; (2) unit of account; and (3) store of value. Money is used as a medium of exchange because money is the item people use to purchase goods and services. Money is used as a unit of account because it’s the yardstick people use to post prices and record debts. Money is used as a store of value because it’s an item people use to transfer purchasing power from the present to the future. 2. The primary responsibilities of the Federal Reserve are to regulate banks, ensuring the health of the banking system, and to control the quantity of money that is made available in the economy. If the Fed wants to increase the supply of money, it usually does so by creating dollars and using them to purchase government bonds from the public in the nation’s bond markets. 3. Banks create money when they make loans and hold a fraction of the amount of the loans in reserves, resulting in an expansion of both money and credit in the economy. If the Fed wanted to use all three of its tools to decrease the money supply, it would: (1) sell government bonds from its portfolio in the open market to reduce the number of dollars in circulation; (2) increase reserve requirements to reduce the money created by banks; and (3) increase the discount rate to discourage banks from borrowing reserves from the Fed. Questions for Review 1. Money is different from other assets in the economy because it is the most liquid asset available. Other assets vary widely in their liquidity. 2. Commodity money is money with intrinsic value, like gold, which can be used for purposes other than as a medium of exchange. Fiat money is money without intrinsic value; it has no value other than its use as a medium of exchange. Our economy today uses fiat money. 3. Demand deposits are balances in bank accounts that depositors can access on demand simply by writing a check. They should be included in the stock of m