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 Reserves Board of Governors? How do the Feds 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 economys 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? .