Economics Chapter 10 – Money And Banking Test Questions – Flashcards

Unlock all answers in this set

Unlock answers
question
Money
answer
anything that serves as a medium of exchange,, a unit of account, and a store of value
question
Medium of Exchange
answer
anything that is used to determine value during the exchange of goods and services
question
Barter
answer
the direct exchange of one set of goods or services for another
question
Unit of Account
answer
a means for comparing the values of goods and services
question
Store of Value
answer
something that keeps its value if it is stored rather than used
question
Currency
answer
coins and paper bills used as money
question
Commodity Money
answer
objects that have value in themselves and that are also used as money
question
Representative Money
answer
objects that have value because the holder can exchange them for something else of value
question
Fiat Money
answer
money that has value because the government has ordered that it is an acceptable means to pay debts
question
Three Uses of Money
answer
1.) Money as Medium of Exchange 2.) Money as a Unit of Account 3.) Money as a Store Value
question
The 6 Characteristics of Money
answer
1.) Durability 2.) Portability 3.) Divisibility 4.) Uniformity 5.) Limited Supply 6.) Acceptability
question
Bank
answer
an institution for receiving, keeping, and lending money.
question
National Bank
answer
a bank chartered, or licensed, by the national government
question
Bank run
answer
Widespread panic in which great numbers of people try to redeem their paper money
question
greenback
answer
paper currency issued during the Civil War
question
Gold Standard
answer
a monetary system in which paper money and coins are equal to the value of a certain amount of gold
question
Federal Reserve System
answer
the nation's central banking system
question
Central Bank
answer
bank that can lend to other banks in time of need
question
Member Bank
answer
ban that belong to the Federal Reserve
question
Federal Reserve note
answer
the national currency that we use today in the United States
question
Great Depression
answer
the severe economic decline that began in 1929 and lasted for more than a decade
question
Federal Deposit Insurance Corporation (FDIC)
answer
the government agency that insures customer deposits if a bank fails
question
The First Bank of the United States
answer
- to hold the money that the government collected in taxes - to help the gov't carry out its powers to tax, borrow money in the public interest, and regulate interstate and foreign commerce - to issue representative money in the form of bank notes, which were backed by gold and silver - to ensure that state-charted banks held sufficient gold and silver to exchange for bank notes should the demand rise
question
The Free Banking Era
answer
1) Bank runs and panics 2.) Wildcat banks 3.) Fraud 4.) Many different currencies
question
National Banking Acts of 1863 & 1864
answer
1.) the power to charter banks 2.) the power to require banks to hold adequate gold and silver reserves to cover their bank notes 3.) the power to issue a single national currency
question
Gold standard advantages
answer
1.) it set a definite value for the dollar 2.) the government could issue currency only if it had gold in the treasury to back notes
question
S&L Crisis reasons
answer
- Deregulation - High interest rates - Bad loans - fraud
question
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)
answer
essentially abolished the independence of saving and loan industry
question
Money Supply
answer
all money available in the United States economy
question
liquidity
answer
the ability to be used as or directly converted to cash
question
demand deposit
answer
the money in checking accounts
question
money market mutual
answer
a fund that pools money from small savers to purchase short-term government and corporate securities
question
Fractional reserve banking
answer
a banking system that keeps only a fraction of funds on hand and lends out the remainder
question
default
answer
failure to pay back a loan
question
mortgage
answer
a specific type of loan that is used to buy real estate
question
Credit card
answer
a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services
question
Interest
answer
the price paid for the use of borrowed money
question
Principal
answer
the amount of money borrowed
question
Debit card
answer
a card used to withdraw money
question
Creditor
answer
person or institution to whom money is owed
question
M1
answer
`represents money that people can gain access to easily and immediately to pay for goods and services
question
M2
answer
consists of all assets in M1 plus several additional assets (cannot be sed as cash directly but can be converted to cash fairly easily)
question
Functions of Financial Institutions
answer
- Storing money - Saving money - loans - Mortgages - Credit Cards - Simple and Compound Interest
question
Four most common ways to save money:
answer
1.) Saving accounts 2.) Checking Accounts 3.) Money market accounts 4.) Certificates of Deposits (CDs)
question
Types of Financial Institutions
answer
- Commercial Banks - Saving and Loans Associations - Saving Banks - Credit Unions - Finance Companies
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New