Money?

Classify the following as to whether it’s A) Commodity money, B) Fiat money, C) Bank money, D) a financial asset that’s not money, E) None of the above.

  1. A $10 bill _B__
  2. Gold in the 19th Century_A___
  3. Gold today __D (or E)__
  4. A nickel and a penny__B___
  5. In N Out French Fries__E__
  6. Postage Stamps__E__
  7. Travelers Checks __C___
  8. “Soups” in the Santa Cruz county jail __A__
  9. Deposit in a bank savings account ___D__ (note, savings deposits are not considered money since we are using the M1 definition of money)
  10. A blank check __E__ (it’s the deposit in the checking account that is money)
  11. Salt, at times in the past__A__
  12. Historically, cacao nibs in Mexico __A___
  13. A 6-month CD account __D___
  14. Shares of stock of IBM __D___
  15. Deposit in a checking account__C___
  16. Whiteboard markers __E__

Classify the following transactions as to whether the person (I)ncreased their money holding, (D)ecreased their money holding, or their money holding (S)tayed the same.

  1. A person buys French fries at In N Out __D__
  2. With new higher interest rates, a person moves some of their checking account balance into an interest bearing savings account__D__
  3. A person deposits cash into a checking account__S__ (note: both are money)
  4. A person transfers from a savings account to a brokerage account and buys Microsoft stock__S__
  5. A person withdrawals cash from a bank savings account__I__
  6. A person writes a check to pay for their monthly rent__D__
  7. A person pays for a dinner with their debit card __D__
  8. A person charges a dinner on their credit card__S__
  9. A person writes a check to pay off that month’s charges on their credit card__D__
  10. A person writes a check to buy some IBM stock ___D__
  1. What three things happen if there’s a surplus of money?

People splurge, trying to spend their excess money supply

Prices rise from the splurging, people spending more than normal

Prices rising means the value of money is falling

  1. What three things happen if there’s a shortage of money?

People hoard their money, trying to acquire their shortfall

Prices fall from the hoarding, people are spending less than normal

Prices falling means the value of money is rising

  1. What are three ways that the Fed is autonomous from the rest of government?

Governing Board is appointed for long terms thus isolated from politics

Self funded, not dependent upon Congress for funding

Can’t directly deal with the rest of the government (in the purchasing of financial securities)

  1. What is the one way the Fed is political, and thus not completely independent?

The Fed needs the protection and support of the president to block Congressional changes to the structure of the Fed.