Econ3 – Boundless Economics Flashcards
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barter
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trading goods/services
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three uses of $
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medium of exchange, store of value, unit of account
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medium of exchange
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BUY STUFF, Anything that is used to determine value during the exchange of goods and services
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store of value
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KEEPS WORTH: If you do not use all your dollars to buy goods and services today, you can hold the rest to use in the future.
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unit of account
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A standard unit in which prices can be stated and the value of goods and services can be COMPARED; one of the three functions of money.
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six characteristics of money
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portable, uniform, durable, divisible, limited, accepted
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four types of money
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commodity, representative, fiat, electronic
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Commodity money
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shells, gold, salt, sheep
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representative money
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paper representing a commodity
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fiat money
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paper money not represented by commodity
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electronic money
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paperless money
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currency
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the coins and paper bills used as money
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difference between representative money and fiat
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representative money can be converted into commodity(gold); fiat cannot
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bank
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institution for receiving, keeping, lending money
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federal reserve system
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central banking system of the united states
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FDIC
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government institution that covers bank accounts against bank failure
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greenback
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paper money that was issued by US treasury during civil war
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gold standard
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system in which country's money is backed with gold
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After the civil war
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first bank of united states formed...
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state chartered banks
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banking during the free banking era (1837-63) this type of bank dominated
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After Civil war national banking acts gave federal government the power to
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run charter banks, require banks to hold adequate gold/silver, national currency
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After Civil war national banking act did not give power to
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insure against bank failure
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After great depression of 30s the banking system was reformed by
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taking the banking system off the gold standard
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savings and loan crisis in late 20th century was caused partially by
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high interest rates, band loans, fraud
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1791-1811
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first bank of us
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1816-1832
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second bank of us
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anti federalist
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against strong central bank/ central government
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federalist
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believed country needs a strong central bank to establish economic stability
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thomas jeffereson
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anti-federalist
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alexander hamilton
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federalist
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1913
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federal reserve created in response to panic of 1907
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1933
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fdic created in response to great depression of 30's
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structure of federal resereve
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12 regional banks
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why 12 regional banks
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localized, based on regional economies, based on 1913 population (never changed it)
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what does the federal reserve do
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serve banks, serve government, regulate banks, regulate money supply
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who owns the federal reserve
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owned by the banks, run by the government
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who runs the federal reserve
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board of 7 members, 1 chairman
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The ownership of the federal reserve by the banks gives the federal reserve a high degree of
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political independence
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commercial banks
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Privately owned financial institutions that accept demand deposits and make loans and provide other services for the public
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fractional banking
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a banking system that keeps only a fraction of funds on hand and lends out the remainder
