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Macroeconomics Exam Questions & Answers

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Macroeconomics Exam Questions & Answers Anything that is a medium of exchange, a unit of account/measure of value/standard of value, or store of value - ANSWERSMoney A function of money that buys goods and services, avoids the barter system, and has a transaction approach to money - ANSWERS...

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  • March 25, 2025
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  • Macroeconomics
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Macroeconomics Exam Questions &
Answers

Anything that is a medium of exchange, a unit of account/measure of value/standard of value,
or store of value - ANSWERSMoney



A function of money that buys goods and services, avoids the barter system, and has a
transaction approach to money - ANSWERSMedium of exchange



A function of money that has a yardstick or measuring rod approach, and every good or service
is stated in terms of money - ANSWERSUnit of account/measure of value/standard of value



A function of money where the good maintains its value over time, you store money today and
use it in the future, the liquidity approach to money, when inflation increases the value of
money decreases - ANSWERSStore of value



What are the components of M1? - ANSWERSCP (currency), CD (checkable deposits), and
Travelers checks



Which component of M1 is the largest? - ANSWERSCD (55%)



What are the components of M2? - ANSWERSM1 and savings accounts (money market
accounts, small time deposits, and money market mutual funds held by individuals)



What types of money are excluded from M1? - ANSWERSCurrency held by the U.S. Treasury,
Federal Reserve banks, banks and thrift institutions, and checkable deposits of government

, What is token money? - ANSWERScurrency (paper money and coins)



Why are credit cards not considered money? - ANSWERSThey are a convenient way of obtaining
a short-term loan.



Items that have value in themselves as well as value in their use as money (gold, silver, copper) -
ANSWERSCommodity money



Anything that is money because the government says it is - ANSWERSFIAT money



Anything the government says must be accepted in payment of a debt - ANSWERSLegal tender



What gives money its value? - ANSWERSAcceptability, legal tender, and fiat money



What is the purchasing power of the dollar? - ANSWERSthe amount a dollar will buy



What does the equation D=1/P mean? - ANSWERSValue of the dollar = 1/price level



The demand for money as a medium of exchange - ANSWERSTransaction demand for money



The amount of money people want to hold as a store of value - ANSWERSAsset demand for
money



When and why was the Federal Reserve created? - ANSWERSDecember 1913 to protect the Fed
from political pressures of Congress so it could effectively control the money supply and
maintain price stability



What is the major purpose of the Federal Reserve? - ANSWERSTo control the money supply

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