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Business exam 5 > chap 20 > Flashcards

chap 20 Flashcards

1
Q

federal reserve

A

the organization in charge of money in the United States

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2
Q

two critical issues in the U.S that depend on the availability of money

A

economic growth and the creation of jobs

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3
Q

Money

A

anything people generally accept as payment for goods and services (salt, stones, animals)

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4
Q

Barter

A

the direct trading of goods and services for other goods and services

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5
Q

barter exchange

A

where you can buy goods or services into the system and get trade credits for other goods and services that you need

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6
Q

five standards for useful money

A

Portability, Divisibility, Stability (everyone agrees on the value), Durability and Uniqueness

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7
Q

E-money

A

newer form of money, electric money ( paypal, google pay, apple pay, bitcoin)

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8
Q

money supply

A

the amount of money the Federal Reserve makes available for people to buy goods and services

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9
Q

how does the federal reserve control the money supply

A

trillions of dollars were printed because of the covid 19 pandemic to keep the economy moving

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10
Q

quantitative easing

A

The Fed can create more money by buying bonds when it believes that money is needed to get the economy moving again

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11
Q

M-1

A

includes coins and paper bills, and money that is available by writing checks (money that is easily accessed)

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12
Q

M-2

A

includes everything M-1 has and money that may take more time to obtain (savings accounts, money market accounts, mutual funds, certificates of deposits.)

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13
Q

M-3

A

everything M-2 has plus big deposits like institutional money market funds

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14
Q

example of inflation

A

the fed generates twice as much money as exists now, there would be twice as much money available, but still the same amount of goods and services (prices would go up)

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15
Q

inflation

A

the rise in prices “too much money chasing too few goods”

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16
Q

deflation

A

the decrease in prices

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17
Q

the size of the money supply can affect

A

employment and economic growth

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18
Q

global money supply is controlled by

A

central banks

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19
Q

falling dollar value

A

the amount of goods and services you can buy with a dollar in global markets dcreases

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20
Q

rising dollar

A

the amount of goods and services you can buy with a dollar goes up

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21
Q

the value of the dollar depends on

A

sting economy

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22
Q

five parts of the Federal Reserce

A

The Board of Governors
Federal Open Market Committee
12 Federal Reserve banks
Three advisory councils
The member banks of the system

23
Q

The Fed

A

buys and sells foreign currencies, regulates types of credit, supervises banks, and collects data on the money supply and other economy activity

24
Q

monetary policy the Fed

A

(RESERVE REQUIREMENT) the level of reserve funds all financial institutions must keep at one of the 12 Federal Reserve banks,
(OPEN MARKET OPERATIONS) buys and sells government securities, (discount rate) lends money to member banks at an interest rate

25
Q

reserve requirement

A

a percentage of commercial banks’ checking and savings accounts they must keep in the bank (as cash in the vault) when it increases the reserve requirement money becomes scarcer reducing inflation

26
Q

open-market operations

A

The buying and selling of government bonds.
If the Fed wants to increase the money supply, it will buy back the government bonds from people and that money goes into circulation increasing the money supply.

27
Q

discount rate

A

The interest rate the Fed charges for loans to member banks.
An increase in the discount rate discourages banks from borrowing and reduces available loans, lowering the discount rate encourages member banks to borrow money and increase the funds they have available for loans increasing the money supply

28
Q

Fed check-clearing role

A

(1)the retailer will take the check to its bank
(2)the bank will deposit the check for credit in a closed Fed back
(3)that bank will send the check to the local Fed bank for collection
(4)the check is sent to your bank to be withdrawn
(5) your bank will authorize to deduct the amount
(6) it will credit the deposit account at the retailers bank
(7) that bank will credit the account of the retailer

29
Q

`banking and the great depression

A

The Federal Reserve was designed to prevent a repeat of the 1907 panic. the stock market crash of 1929 led to bank failures and people hurried to banks to withdraw cash.

30
Q

the U.S banking system consists of…

A

commercial banks, savings and loan associations, and credit unions

31
Q

commercial banks

A

a profit-seeking organization that receives deposits from individuals and businesses in the form of checking and savings accounts and uses these funds to make loans

32
Q

commercial banks…

A

makes a profit by using depositors’ funds as inputs to invest in interest-bearing loans to other customers

33
Q

the technical name for a checking account

A

demand deposit (the money in a demand deposit can be withdrawn anytime on demand from the depositor)

34
Q

technical name for a savings account

A

time deposit (the bank can require prior notice before the owner withdraws money from the time deposit)

35
Q

certificate of deposit (CD)

A

a savings account that earns interest to be delivered at the end of the certificates maturity date

36
Q

saving and loan associations (S&Ls)

A

a financial institution that accepts both savings and checking deposits and provides home mortgage loans. their original purpose was to promote customer thrift and home ownership.

37
Q

credit unions

A

non-profit, member-owned financial cooperatives that offer the full variety of banking services to their members, interest-bearing checking accounts at relatively high rates, short-term loans at relatively low rates, financial counseling, life insurance policies, and a limited number of home mortgage loans.

38
Q

nonbanks

A

financial organizations that accept no deposits but offer many of the services provided by regular banks. they include life insurance companies, pension funds, brokerage firms, commercial finance companies, and corporate financial services

39
Q

pension funds

A

amounts of money put aside by corporations, or unions to cover part of the financial needs of members when they retire. contributions are made by and/or employees, employers.

40
Q

banks learned they could avoid rick of questionable loans by…

A

dividing up their portfolio of mortgage and selling the mortgage-backed securities to tother banks and organizations.

41
Q

federal deposit insurance corporation (FDIC)

A

an independent agency of the U.S. government that issues bank deposits. if a bank were to fail, the FDIC would arrange to have bank accounts transferred to another bank or reimburse depositors up to 250000 per account

42
Q

deposit insurance fund (DIF)

A

covers all deposits above the FDIC limits at other banks

43
Q

National credit union administation (NCUA)

A

provides up to 250000 coverage per individual depositor per institution. includes checking accounts, savings accounts, money market accounts, and certificates of deposits

44
Q

Electronic funds transfer system (EFT)

A

computerized system that electronically performs financial transactions like making purchases, paying bills, and receiving paychecks

45
Q

debit card

A

an electronic fund transfer tool that serves the same function as checks (withdraws funds from a checking account)

46
Q

smart card

A

an electronic funds transfer tool that is a combination of credit card, debit card, phone card, driver’s license etc

47
Q

online banking

A

you can complete all your financial transactions from home, using your computer or phone to transfer funds, pay bills and check your account balance

48
Q

banks help companies conduct business in other countries by providing…

A

letters of credit, bankers acceptance, and money exchange

49
Q

letter of credit

A

a promise by the bank to pay the seller a given amount if certain conditions are met

50
Q

banker acceptance

A

a promise that the bank will pay some specified amount at a particular time

51
Q

the world bank

A

the bank primarily responsible for financing economic development, aka the international bank for reconstruction and development

52
Q

international monetary fund (IMF)

A

organization that assists the smooth flow of money among nations

53
Q

what caused the banking crisis

A

the government urged banks to make loans to borrowers who could not afford to repay. they created mortgage-backed securities and sold them to other banks and organizations, the government did not regulate the transactions well, so many banks failed because housing values fell and people defaulted on their loans.

54
Q

what agencies insure the money you put into a bank or credit union

A

money up to 250,000 deposited into banks is insured by the Federal Deposit Insurance Corporation (FDIC) the Deposit Insurance Fund (DIF) insures money above 250,000, and money in credit unions is insured by the National Credit Union Administration (NCUA) up to 250000

Business exam 5 (4 decks)

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