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34 Cards in this Set
- Front
- Back
- 3rd side (hint)
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What is Money?
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Anything that serves as a medium of exhange, a unit of account, and a store of value
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ex. currency, coinage, wampums, livestock, etc.
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What is a Medium of Exchange?
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Anything that is used to determine value during the exchange of goods & services
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people acquire goods & services through money or by bartering
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What is Barter?
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The direct exchange of one set of goods or services for another used in traditional unspecialized economies.
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Used in traditional economies: Asia, Africa, Latin America & the U.S.A. informally
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What is a Unit of Account?
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A means for comparing the values of goods & services.
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Price comparisons for determining purchases
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What is a Store of Value?
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Money keeps its value if you decide to hold on to-or store- it instead of spending it.
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This is good practice unless the economy experiences rapid inflation during a particular year.
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What is Currency?
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The coins and paper bills used as money.
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6 characteristics of money:
durability, portability, divisibility, uniformity, limited supply, & acceptability. |
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What is Commodity Money?
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Objects that have value in and out of themselves and that are also used as money.
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Examples are salt, cattle, and precious stones which have other uses & value to man besides a rate of exchange.
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What is Representative Money?
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Makes use of objects that have value because the holer can exchange them for something else of value.
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Early types were paper reciepts for gold or silver. Transactions required weighing & testing coins for purity
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What is Fiat Money?
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Called "Legal Tender", this money has value because the government ha ordered that it is and acceptable means to pay debts.
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Federal Reserve controls its supply therefore preserving its value & helping this system work.
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What is a Bank?
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An institution for receiving,
keeping, and lending money-near your home. |
Todays ______ have developed over the nation's history to meet needs of a growing & changing populaton.
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What is the National Bank?
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A bank chartered/licensed by National Gov. which could issue a single currency for the entire nation, manage the federal government's funds, and monitor other banks throughout the country
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Secretary of Treasury in 1789, proposed a bank chartered & licensed by the National Government.
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What is a Bank Run?
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Widespread panics in which great numbers of people tried to redeem their paper money at once causing banks to fail & public confidence to go down.
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This happened when customers found it difficult to exchange their paper money for gold & silver.
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What are Greenbacks?
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The common name for currency produced in 1861 by the U.S. Treasury called "demand notes"
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Coined the name because they were printed in green ink.
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What is the Gold Standard?
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A monetary system in which paper money and coins are equal to the value of a certain amount of gold.
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Two Advantages were: 1. It set a definite value for the dollar so 1 oz/gold = $20 & 2. The gov.could issue currency only if it had gold in the treasury to back the notes.
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What is the Federal Reserve System (Fed)?
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The nation's first true "central bank" which could lend to other banks in time of need.
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This national bank reorganized the federal banking system through member banks, Federal Reserve Board, Short-Term Loans & Federal Reserve notes.
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What are Member Banks?
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Banks belonging to the Federal Reserve System which stored some of their cash reserves at the district Fed.
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Banks that were governed by Federal Reserve Board, allowed short term loans and issued Federal Reserve Notes.
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What are Federal Reserve Notes?
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The national currency of U.S.A. increased/decreased by the Federal Reserve for circulation to meet business needs.
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Standardized U.S. currency started in 1913 by the Federal Reserve Act.
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What was the Great Depression?
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A severe economic decline that began in 1929 and lasted more than a decade.
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Caused by unpaid high-risk business loans,unpaid farm loans due to drought & crop failure & the 1929 stock market crash due to widespread runs on banks due to depositors panic.
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What is the Federal Deposit Insurance Corporation (FDIC)?
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Congress passed this act in 1933 to insure customer deposits if a bank fails.
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At 1st it insured deposits up to $2,500 but today has risen to $100,000 protection
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What is the Money Supply?
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All the money available to the United States economy.
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Includes currency, traveler's checks, checking account deposits, & other components.
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What is Liquidity?
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The ability to be used as, or directly converted into, cash referred to by economists as M1.
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The term for M1 money that people gain access to easily and immedicately to pay for goods & services
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What are Demand Deposits?
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Funds in checking accounts as they are paid "on demand"
or at any time. |
Include "other checkable deposits" or checking accounts not paying interest.
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What are Money Market Mutual Funds?
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Part of M2 funds which pool money from small savers to purchase short-term government and corporate securities.
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M2 Deposits that earn interest and cover checks written over a certain minimum account
( ex. $250.00) |
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What is Fractional Reserve Banking?
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A banking system that keeps only a fraction of funds on hand and lends out the remainder.
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Banks lending money to homeowners for home improvements, college tuitions, & start-up costs for businesses
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What is a Default?
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When a borrower fails to pay back a loan causing the lender ( bank ) to lose money.
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Too many bad loans and banks will be out of business.
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What is a Mortgage?
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A specific type of loan used to buy real estate.
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Families often pay a percentage of the cost of a house/real estate loan with repayment over a 15,25,or 30 yr. period with interest based on creditworthiness.
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What is a Credit Card?
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A card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services.
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A card allowing you to purchase goods/services on credit. The issuer (bank) pays the charge purchases & you pay back the bank with interest based on lender rates & time taken to repay
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What is Interest?
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The price paid for the use of borrowed money.
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This price of borrowing is simple or compound and set by the lender.
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What is Principal?
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The amount borrowed from a lender.
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Simple interest is paid only toward this. Ex. If you deposit $100 in a savings account @ 5% interest, you will make $5 in a yr. ( if pd. annually)
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What is a Debit Card?
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A card used to withdraw money from an ATM/automated teller machine or to pay a store for a good/service.
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Cost of electronic banking is cheaper with this card, 7cents vs. 35cents for processing a paper check
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What is a Creditor?
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A person or institution to whom money is owed.
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Automated Clearing Houses (ACMs) located in Federal Reserve Banks are used by people to repay mortgage payments to their ___?_____.
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What is a Central Bank?
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A bank that can lend to other banks in times of need.
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Term for the FED (Federal Reserve System) which lent to member banks and is headed by the Federal Reserve Board.
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Any money that people can gain access to easily & immediately to pay for goods & services ( i.e., liquidity) including currency, checks, travelers' checks, et. al.
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M1 money
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All assets in M1 plus "near money" ex. deposits in savings accts.
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M2 money
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