listen to the This American Life audio clips.

1. In the opening clip, reporter Jacob Goldstein is trying to understand where all the lost money went during the financial crisis. He asks his business savvy aunt "Where did all that money go?" and her response is "Money is fiction." What does she mean by saying that "money is fiction"?

2. The Federal Reserve (the Fed) is the central bank of the United States with the power to create money. When the Fed decides to increase the money supply by creating more money, how do they go about doing this? What role do banks play in this process? What is it that the Federal Reserve buys and sells to achieve their goal? Where does the money come from to pay for all their purchases?

3. During the financial crisis the Federal Reserve bought mortgage backed securities. Why did they do it? How much money were they mandated to purchase these securities - how far off were they?

Answer rating: 100% (QA)

1 Money as Fiction Money is a humanmade concept that represents value It doesnt have intrinsic value like gold or food its worth comes from collective agreement and trust During financial crises such ... View the full answer