Quiz 2 Macroeconomics
1. What is the difference between commodity money and fiat money? Why do people accept fiat
money in trade for goods and services?
Fiat money has no intrinsic value, and commodity money does have intrinsic value. Fiat money is used
because of government decree.
2. Compare the Board of Governors and the Federal Open Market Committee.
The Board of Governors runs the Federal Reserve. Its seven members are appointed by the president and
are approved by the Senate.
The Federal Open Market Committee includes the members of the Board of Governors and 5 of the 12
regional bank presidents. The chair of the Board of Governors is also the chair of the Federal Open
Market Committee. The FOMC meets every six weeks in Washington, D.C. to discuss the condition of
the economy and to consider changes in monetary policy.
3. What makes the New York Federal Reserve regional bank so important?
The president of the N.Y. Federal Reserve regional bank is the only regional bank president who’s always
a voting member of the FOMC.
4. Designers of the Federal Reserve System were concerned that the Fed might form policy
favorable to one part of the country or to a particular party. What are some ways that the organization of
the Fed reflects such concerns?
A. The president appoints the Board of Governors and the Senate has to approve them.
B. Since the members of the Board of Governors serve 14-year terms, it’s not likely that one
