Chapter 10 Flashcards
Functions of banks
- Store money
- Save money
- Loans
- Safety Deposit Boxes
- Traveler’s checks and orders
- Credit cards
- Foreign Currency Exchange
- Investments and consulting
Banks
Financial institutions that accept demand deposits and make commercial loans
Commercial Banks
Focus more in business than individual banking
Money
Anything that serves as a medium o exchange, a unit of account, and a store of value.
Medium of exchange
Anything that is used to determine value during the exchange of goods and services
Barter
The direct exchange if one set of goods or services for another
Unit of account
A means of comparing the values of goods and services
Store of value
Something that keeps its value if it is stored rather than used
Currency
Coins and paper bills used as money
Commodity money
Objects that have value in themselves and that are also used as money
Representative money
Objects that have value because the holder can exchange them for something else of value
Fiat money
Money that has value because the government had ordered that it is an acceptable means to pay debts
National bank
A bank chartered or licensed by the national government
Bank run
Widespread panic in which great numbers of people try to redeem their paper money
Greenback
Paper currency issued during the Civil War
Gold Standard
A monetary system in which paper money and coins are equal to the value of a certain amount of gold
Federal Reserve System
The nation’s central banking system
Central bank
Bank that can lead to other banks in times of need
Member bank
Banks that belongs to the Federal Reserve System
Federal Reserve notes
The national currency we use today in the US
Great Depression
The severe economic decline that began in 1929 and lasted for more than a decade
4 C’s of Credit
Character
Capacity
Capital
Collateral
Collateral
What you do have to surrender to a loan if you default.
What are you going to give up when you default
Capital
Income plus savings and checking
Capacity
How make you make
How long have you current job
