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Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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4. When is it legal to reproduce a U.S. dollar note?
5. How many commercial banks are there in the United States?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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MATCH THE NAME OF THE CURRENCY WITH THE COUNTRY THAT ISSUES IT.
_______ 13. Dollar
_______ 14. Rupee
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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MARK EACH STATEMENT EITHER TRUE OR FALSE.
1. Where is the U.S. stock of gold and silver bullion stored? What is the value of these assets?
2. Whose signature appears on U.S. currency?
3. What is the largest denomination bill issued today?
4. When is it legal to reproduce a U.S. dollar note?
5. How many commercial banks are there in the United States?
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7. Ulysses S. Grant—f ($50)
9. George Washington—a ($1)
11. Thomas Jefferson—b ($2)
Currencies:
13. Dollar—e (New Zealand)
15. Peso— j (Argentina)
17. Pound—h (United Kingdom)
19. Rand—c (South Africa)
21. Yen—b (Japan)
23. A retailer is required by law to accept any U.S. coins in payment for goods.
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
24. U.S. dollars are backed by the country’s gold and silver assets.
26. The U.S. government plans to recall all currency and replace it with the newly designed currency.
27. It costs the U.S. Mint more than 1 cent to mint a penny.
28. The $1 bill makes up 20% of the currency printed by the U.S. Mint.
Name: ___________________________
Date: ___________________________
critical thinking exercise 20-3
CURRENCY TRADING
1. What is the value in United Kingdom pounds of 100 U.S. dollars?
2. How many Canadian dollars will 20 U.S. dollars buy?
3. What is the value in Euros of 100 United Kingdom pounds?
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4. How many Euros will 1,000 Japanese yen buy?
5. What is the value in Mexican pesos of 100 Canadian dollars?
6. How many Japanese yen will 500 United Kingdom pounds buy?
7. How many U.S. dollars would it take to buy $1,000 in Canadian dollars?
8. What is the value in Japanese yen of 1,000 Deutsche marks?
1. What is the current federal funds percentage rate? How has this rate changed in the past year?
2. What is the current reserve requirement for banks? Is the reserve requirement the same for all
banks (“depository institutions”)?
3. What is the primary concern of the Fed Open Market Committee now—inflation or recession?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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4. Look back at the Open Market Committee actions for previous years. Compare the actions of the
Federal Reserve today with those two years ago. How has the emphasis changed?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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discussion questions for bonus case 20-1
1. Coins are more durable than bills and cost less to produce. But in recent years the Treasury has
twice introduced one-dollar coins—the Susan B. Anthony coin and the Sacagawea coin—that
have not been accepted by the public. Why do you think people resist using these dollar coins?
2. Some European currencies use bright-colored inks for different denominations. Do you think the
American consumer would accept “orangebacks” or “bluebacks” as replacements for today’s
“greenbacks”? Why or why not?
3. To make different denominations of currency easier to identify, some people have suggested that
each denomination’s size be different. What changes in the economy would be necessary if higher
denomination bills were physically larger?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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bonus case 20-2
BERNANKE’S BIG GAMBLE
In a technical sense, the recession is over. The overall economy has ceased to contract and a re-
1. What is the key role the Federal Reserve plays in the U.S. economy?
2. Why are critics of the Fed’s action concerned about inflation?
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1. What is the key role the Federal Reserve plays in the U.S. economy?
2. Why are critics of the Fed’s action concerned about inflation?
1. Why did official money lose its meaning in Germany during the 1920s?
2. Do you believe that the United States could be facing a hyperinflation problem in the foreseeable
future? Why or why not?
3. How can we deal with hyperinflation? What is the role of the Federal Reserve in controlling infla-
tion? How does it perform this function?
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1. Why did official money lose its meaning in Germany during the 1920s?
2. Do you believe that the United States could be facing a hyperinflation problem in the foreseeable
future? Why or why not?
3. How can we deal with hyperinflation? What is the role of the Federal Reserve in controlling in-
flation? How does it perform this function?
Chapter 20 - Money, Financial Institutions, and the Federal Reserve
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bonus case 20-4
REFORMING WALL STREET
Though the United States has certainly learned its share of lessons from the economic meltdown
1. Would banking reform threaten the U.S. free-market economy?
2. Do we really need reform in the banking industry?
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1. Would banking reform threaten the U.S. free-market economy?
2. Do you believe that the United States could be facing a hyperinflation problem in the foreseeable
future? Why or why not?
endnotes
i Sources: Associated Press, “Is the Penny Worth It? Rising Cost May Mean End to Coin,” The Clarion-Ledger, July
