Chapter 15 Flashcards
Money
anything that is accepted as payment for goods/services
Currency
cash held in the form of coins and paper money
Domestic Demand
influenced primarily by prices for goods and services, income levels, and the availability of alternate payment methods such as credit cards
Foreign Demand
influenced by the political and economic uncertainties associated with some foreign currencies, and recent estimates suggest that between one-half and two-thirds of the value of currency in circulation is held abroad
BEP
Treasury’s Bureau of Engraving & Printing
Demand Deposits
consists of money kept in checking accounts that can be withdrawn by depositors on demand
Time Deposits
deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand
M1
used to describe the total amount of readily available money in the system and includes currency and demand deposits
M2
included M1 money plus time deposits and other money that is not immediately accesible
Federal Reserve System (the Feds)
created in 1913, the central bank of the US
Federal Open Market Committee (FOMC)
Fed policy-making body
Open Market Operations
most frequent tool - involves the purchase or sale of US government bonds
Treasury bonds
long-term loans (5+yrs) made by businesses and individuals to the government
Reserve Requirements
as part of the Feds, banks must hold some of their deposits in cash in their vaults or in an account at a district bank
Discount Rates
the interest rate charged to member banks by the Feds
Selective Credit Control
setting rules on credit
Consumer Credit Rules
establish the minimum down payment and maximum repayment periods for consumer loans
Margin Requirements
specify the minimum amount of cash an investor must put up to buy securities or investment certificates issued by corporations/governments
Float
allows the check writer to retain the funds until the check clears when the funds are actually withdrawn from its account
Dodd-Frank Act
created an oversight council to monitor risks that affect the financial industry
Financial Intermediation
process in which institutions accept savers’ deposits and invest them in financial products (loans) that expected to produce a return
Households
suppliers of funds
Businesses and Government
demander of funds
Depository Financial Institutions (DFI)
accept deposits
Commercial Banks (DFI)
a profit-oriented financial institution that accepts deposits, make business and consumer loans; privately-owned
Bank Charter
an operating license
National Banks (DFI)
chartered b the Comptroller of Currency, part of the US Treasury Department; must belong to the Feds and be insured by the FDIC
State Banks (DFI)
chartered by the state in which they are based; not required to belong to the Feds
Thrift Institutions
depository institution personally designed to encourage household saving and to make home mortgage loans
Savings & Loans Association (S&Ls) (Thrift)
keep large %s of their assets in home mortgages
Saving Banks (Thrift)
focus less on mortgage and more on stock and bond investments
ACSI
American Consumer Satisfaction Index
Credit Unions
not-for-profit, member-owned financial cooperative
Non-Depository Financial Institutions (Non-DFI)
do not accept deposits but do provide certain banking services
Insurance Company (Non-DFI)
major suppliers of funds
Cat-Risk Businesses
forecast potential weather-related expenses for insurers through sophisticated computer modeling that analyzes historical meteorological data
Pension Funds (Non-DFI)
large pools of money set aside for later use in retirement benefits to employees or member
Brokerage Firm (Non-DFI)
buys and sells securities (bonds & stocks) for its clients and gives them related advice
Finance Company (Non-DFI)
makes short-term loans for which the borrower puts up tangible assets as security
Commercial Finance Loans
gives loans to promising new businesses with no track record and firms that can’t get more credit from a bank
Consumer Finance Loans
loans to individuals, often to cover lease or purchase of large consumer goods
Banking Act of 1933
empowered the Federal Reserve System to regulate banks and reform the bank system; created the FDIC
Federal Saving and Loan Insurance Corporation (FSLIC)(1934)
formed to insure deposits at S&Ls; went bankrupt in the 1980s
Deposit Insurance Funds (DIF)
provides deposit insurance to commercial banks and thrift institutions
National Credit Union Share Insurance Fund
provides deposit insurance to credit unions
Federal Deposit Insurance Corporation (FDIC)
independent, quasi-public corporation backed by the US government
Conversational Commerce
interacting with customers via messaging and digital platforms
