Chapter 10 Test Flashcards
When a person takes out a loan to buy a car, why do they pay back more than they. Borrow?
The must pay interest in addition to the principal they borrow
What were greenbacks
Commodity money used by union during civil war
List the problems of the free banking era
Bank runs Wildcat banks high failure rates Difficult to exchange for gold and silver Fraud Different currencies for diff states
How did high interest rates affect savings and loans in the 1980s
Had to pay out high interest rates to deposits received low returns on loans
Who pays the store where a purchase in made using a credit card
Credit card issuer pays the store
What is fractional reserve banking
A banking system that keeps only a fraction of finds on hand and lends out the other
How did the us government make the American public have confidence in the us currency in the 1870s
Adopted a gold and silver standard
List the liquid assists
Currency
Funds in checking accounts
Travelers checks
What is the purpose of the federal deposit insurance company
Make sure customers do not lose money if bank fails
List the uses if money
Medium of exchange
Unit of account
Store if value
Why did leaders in the early us want to establish a stable banking system
To promote international trade and economy growth
What is bartering
Direct exchange of one set of goods for another
What is the main disadvantage to using shells as money instead of currency
Uniformity
What happens during a bank run
People withdraw more than bank has
What is one reason why many people distrusted te banking system during the free banking era
Many banks didn’t have the gold or silver to back up paper money issued
