TOPICS AND REVIEW QUESTIONS FOR MONEY AND BANKING COURSE

CHAPTER 1& 2

TOPIC

1. History of Money in the US

2. The development of the payments system

3. The development of M2 in the U.S

4. The development of electronic means of payments

5. Explaining monetory causes of 2009 financial crisis

6. Quantitative easing package

7. The operation and structure of the Federal Reserve system

8. The operation and structure of the State Bank of Vietnam

9. The operation and structure of European Central Bank

10. Inflation rate and interest rates in Vietnam over the past 10 years

11. Inflation rate and interest rates in the U.S over the past 10 years

QUESTIONS

1. Briefly define each of the five key financial assets. Is every financial asset also

a financial security? Is it possible that what a saver would consider a financial

asset a borrower would consider a financial liability?

2. What is the difference between direct finance and indirect finance? Which

involves financial intermediaries, and which involves financial markets?

3. In 2009, Dole Food Company, which markets fresh fruits and vegetables,

moved from being a private company to becoming a public company by

conducting an initial public offering (IPO). Were investors who bought stock in

this IPO doing so in the primary market or in the secondary market?

4. Briefly explain why the financial system is one of the most highly regulated

sectors of the economy.

5. What is the Federal Reserve? Who appoints the members of the Federal

Reserve’s Board of Governors? How do the Fed’s current responsi- bilities

compare with its responsibilities when it was first created by Congress?

6. Briefly describe the three key services that the financial system provides to

savers.

7. What is specialization? How does it improve an economy’s standard of living?

8. What are the costs of a barter system?

9. What are transactions costs? How does using money affect the level of

transactions costs in an economy?

10. What makes a dollar bill money? What makes a personal check money? What

factors, if changed, would affect your willingness to accept a dollar bill or a check

as money?

11. What are the four main functions of money? Describe each function.

12. Is the store-of-value function unique to money? If not, give some other

examples of stores of value. Must money be a store of value to serve its func- tion

as a medium of exchange? Why or why not?

13. What is commodity money? How does it differ from fiat money?

14. What is a payments system? If there were a decrease in the

efficiency of the payments system, what would be the cost to the

economy?

15. Why did governments begin issuing paper currency? Why was paper

currency needed?

16. Is the United States likely to become a “cashless society”? Briefly explain.

17. Are the assets included in M1 more or less liquid than the assets included in

M2? Briefly explain.

18. Since the 1960s, which measure of the money supply has grown more

rapidly, M1 or M2? Briefly explain why this is the case. Has the growth of M1

been more or less stable than the growth rate of M2?

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