Economics Chapter 10 Review – Flashcards
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money that has value because the government has ordered that it is an acceptable means to pay debts
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Fiat Money
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the central banking system of the United States
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Federal Reserve System (FED)
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failure to pay back a loan
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Default
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the original amount of money borrowed
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Principal of a loan
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coins and paper bills used as money
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Currency
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the price paid for the USE of borrowed money
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Interest or Interest Rate
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objects that have value in themselves and that are also used as money
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Commodity money
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money pooled from small investors and used to purchase government or corporate bonds
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Money Market Mutual Fund
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the government agency that makes sure that customers' money is safe if a bank fails
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Federal Deposit Insurance Corporation (FDIC)
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a specific type of loan that is used to buy real estate
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Mortgage
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a system that keeps only a fraction of funds on hand and lends out the remainder
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Fractional reserve banking
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objects that have value because the holder can exchange them for something else of value
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Representative money (gold standard)
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6 characteristics of money
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durability, portability, divisibility, uniformity, limited supply, and acceptability.
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narrowest measure of the money supply that includes all coins and paper bills in circulation, traveler's checks, checking account balances, and balances in credit unions
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M1
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measure of the money supply that includes coins and paper bills, traveler's checks, checking accounts, PLUS savings accounts, certificates of deposit, and other liquid assets
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M2
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3 factors that lead to the savings and loan crisis
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high interest rates, high risk loans, and degregulation
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the largest source of income for banks
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interest on loans
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credit cards
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Plastic cards used to make purchases, by borrowing money from the card issuer
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when people withdraw more money than a bank has in reserves
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Bank runs
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Name for Union paper money not backed by gold or silver. Value would fluctuate depending on status of the war
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greenbacks
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Federalist's beliefs about banking
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Centralized banking system was necessary
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Free banking era
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The period 1837-1863 in the United States characterized by the issuance of currency by many private banks.
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the direct exchange of one set of good or services for another (money is not exchanged -- goods or services are)
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barter system
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Debit Card
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A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder
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Financial Institution
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a bank, trust company, insurance company, credit union, building and loan association, savings and loan association, place for deposit of funds or medium of savings or collective investments.
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compound interest
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interest earned on both the principal amount AND any interest already earned
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Availability of resources to meet short-term cash requirements.
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Liquidity
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clap your hands twice if you studied this today
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don't tell others...
