Chapter 15 Understanding Money and Financial Institutions

Question 1

Questions

Answer 1

Answers

Question 2

Anything that is acceptable as payment for goods and services is ____________.

Answer 2

money

Question 3

Cash held in the form of coins and paper money is _______________.

Answer 3

currency

Question 4

Money kept in checking accounts that can be withdrawn by depositors on demand are called _____________.

Answer 4

demand deposits

Question 5

Deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand are ________________–.

Answer 5

time deposits

Question 6

__________ is the total amount of readily available money in the system including currency and demand deposits.

Answer 6

M1

Question 7

The term ________ is used by economists to describe the U.S. monetary supply. Includes all M1 monies plus time deposits and other money that is not immediately accessible.

Answer 7

M2

Question 8

The ____________ is the central bank of the United States and consists of 12 district banks, each located in a major U.S. city.

Answer 8

Federal Reserve System (Fed)

Question 9

The purchase or sale of U.S. government bonds by the Federal Reserve to stimulate or slow down the economy are _______________________.

Answer 9

open market operations

Question 10

The _______________ requires banks that are members of the Federal Reserve System to hold some of their deposits in cash in their vaults or in an account at a district bank.

Answer 10

reserve requirement

Question 11

The _______________ is the interest rate that the Federal Reserve charges its member banks.

Answer 11

discount rate

Question 12

The power of the Federal Reserve to control consumer credit rules and margin requirements is called ______________________.

Answer 12

selective credit controls

Question 13

The process in which financial institutions act as intermediaries between the suppliers and demanders of funds is called _______________.

Answer 13

financial intermediation

Question 14

Profit-oriented financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services are called ________________.

Answer 14

commercial banks

Question 15

A(n) ___________ is an operating license issued to a bank by the federal government or a state government. It is required for a commercial bank to do business.

Answer 15

bank charter

Question 16

Depository institutions formed specifically to encourage household saving and to make home mortgage loans are called ___________________.

Answer 16

thrift institutions

Question 17

Not-for-profit, member-owned financial cooperatives are called _______________.

Answer 17

credit unions

Question 18

____________ are large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members.

Answer 18

pension funds

Question 19

The _________________ is an independent, quasi-public corporation backed by the full faith and credit of the U.S. government that insures deposits in commercial banks and thrift institutions for up to a ceiling of $250,000 per account.

Answer 19

Federal Deposit Insurance Corporation (FDIC)