QUESTIONS FOR REVIEW

Question 4.1

1. Describe the functions of money.

Question 4.2

2. What is fiat money? What is commodity money?

Question 4.3

3. What are open-market operations, and how do they influence the money supply?

Question 4.4

4. Explain how banks create money.

Question 4.5

5. What are the various ways in which the Federal Reserve can influence the money supply?

Question 4.6

6. Why might a banking crisis lead to a fall in the money supply?