FBP C20 - Money and Banking Flashcards
Money
is anything people generally accept as payment for goods and services
Bartering
is the direct trading of goods and services for other goods and services.
What are the five standards for a successful form of money?
- Portability
- Divisibility
- Stability
- Durability
- Uniqueness
Bitcoins
are a form of online money. Bitcoin has an online store that accepts the currency
The Federal Reserve
is an organization in charge of money in the United States.
The Money Supply
is the amount of money the Federal Reserve makes available for people to buy goods and services.
Inflation
general rise in prices
Falling dollar value
the amount of goods and services you can buy with a dollar in the global market decreases.
Rising dollar value
the amount of goods and services you can buy with a dollar goes up
How does the Federal Reserve control the money supply?
(reserve requirement), buys and sells government securities (open-market operations), and lends money to banks (the discount rate). To increase the money supply, the Fed can cut the reserve requirement, buy governments bonds, and lower the discount rate.
Reserve requirement
is a % of commercial banks checking and saving accounts they must keep in the bank pr the noninterest bearing deposit at the Local federal reserve district bank.
Open market operations
consists of buying and selling government bonds
Discount rate
the interest rate the Fed charges for loans to member banks.
How did banking evolve in the US?
After the American Revolution there was such debate about the role of banking, and heated battels between the central and state-chartered system was established, but chaos continued until many banks failed in 1907. The system was revived by the Federal Reserve only to fail again during the Great Depression. There have been 11 recessions since them.
What institutions make up the banking system?
- Savings and loans associations
- Commercial banks
- Credit unions
- Financial organizations or nonbanks that accept no deposits but offer many services of regular banks
What kind of services do they offer?
Banks and thrifts offer such services as:
- Saving accounts
- Checking accounts
- Certificates of deposit
- Loans
- Individual retirement accounts (IRAs)
- Safe deposit boxes
- Online banking
- Life insurance
- Bokerage services
- Traveler’s checks
Commercial bank
is 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.
What is the technical name for a checking account?
Demand deposit, because the money is available on demand for the depositors
A certificate of deposit
is a time deposit (savings) account that earns interest to be delivered on the certificates maturity date.
Credit union
is a non-profit, member owned cooperative 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 counselling, life insurance policies and a limited number of home mortgage loans.
What are some other financial institutions that make loans and preform bandlike operations?
Nonbanks include life insurance companies that lend out their funds, pension funds invest in stocks and bonds and make loans, brokerage firms that offer investment services and commercial finance companies.
What caused the banking crisis?
Government urged banks to make loans to some who could not repay. The banks wanted to minimize the risks of some loans so they created mortgage backed securities and sold them to other banks and organizations throughout the world. The government did not regulate these transactions well and many banks failed because people defaulted their loans.
Money deposited in banks is insured by
the Federal Deposit Insurance Corporations (FDIC)
Money in S&Ls is insured by the
Savings Association Insurance Fund (SAIF)
Money in credit unions is insured by the
National Credit Union Administration (NCUA
Savings and loan association (S&L)
is a financial institution that accepts both savings and checking deposits and provides home mortgage loans. Often known as thrift institutions are their original purpose was to promote consumer thrift and home ownership.
Debit card
looks like a credit card but withdrawn money that is already in your account. When the sale is recorded, the debit card sends a signal to the bank.
Smart card
is an electric funds transfer tool that combines a credit card, debit card, phone card, driver’s license card and more.
Direct deposit
is a credit made directly to a checking or savings account in place of a paycheck.
Direct payment
preauthorized electronic payment
Electronic fund transfer system
messages are sent from one compute to another
Letter of credit
is a promise by the bank to pay the seller given amount if certain conditions are met.
Bankers acceptance
promises that the bank will pay some specified amount at a particular time.
Global markets
banks do not necessarily keep their money in their own countries.
World Bank
primarily responsible for financing economic development
International monetary fund (IMF)
was established to assist the smooth flow of money along nations. It requires members who join voluntarily to allow their own money to be exchanged for foreign money freely.
Nonbanks
are financial organizations that accept no deposits but offer many of the services provided by regular banks. Nonbanks include life insurance companies, pension funds, brokerage firms, commercial and consumer finance companies.
The organization / person in charge of the money supply in the united states is the
Federal reserve
The exchange of goods are services for other goods and services is known as
batering
Thr ampunt of goods and services you can buy with a dollar in the global market
increases with a rising dollar
The methods the Federal Reserve uses to manage the economy include all exept which one:
- control open market operations
- control reserve requirments
- control the federal budget
- change the discount rate
control the federal budget
In the US, the federal reserve is in charge of
the money supply
The discount rate is the
intrest rate that the federal reserve charges for loans to member banks
The primary reason for the creation of the federal reserve was to
prevent another crisis of bank failures
Name four members of the US banking system
- nonbanks that offer financial services
- credit unions
- commercial banks
- saving and loans association
The __ __ is a percentage of commerical banks checking and savings accounts they must keep in the bank
reserve requirment
what does a falling dollar value mean
A falling dollat value means you cannot buy as many goods and services in the global market
When the federal reserve buys and sells goverment bonds it is
engaging in open market operations
Throughout the history of the US, central banks were created and disbanded with much controversy until ___ ensured that a central bank was needed
the bank panic of 1907
The check ___ function of the federal reserve enables banks to settel demand deposits between member banks
clearing
credit unions are owned by__
The credit unions members
Generally speaking, commercial banks grant loans based on
a borrowers creditworthiness
The federal reserve bank serve as the national ___ for checks
clearinghouses
The instant rate the fed charges for loans to member banks is called the ___ rate
discount
a ___ bank is a profit seeking organization that recieves deposits from individuals and corporations in the form of checking
commercial
What role did banks play in the 2008 crisis
they did not take creditworthiness into account when making loans
Open market operations consist of the buying and selling of goverment __
bonds
A major problem during the great depression created by a weak banking system was
a run on and closure of many banks
a checking account is also reffered to as a
demand deposit
the origional purpose of a saving and loan association was to
promote customer thrift and home ownership
the saying “ too much money chasing too few goods: is reffered to as
inflation
the reserve requirment is
the % amount of a banks checkings and savings that must be kept in the bank
the check clearing role of the federal reserve allows ___
banks to settel the check payments between banks in different parts of the country
As a result of the great depression, congress established deposit insurance to
make sure depositers did not lose money in a bank failure
what is a profit seeking organization that has both depositors and borrowers and is equally responsible for both
commercial banks
a majot problem during the great depression created by a weak banking system was
a run on and closure of many banks
What role of the federal reserve has been cited as contributing to the banking crisis of 2008
it kept the cost of borrowing too low
in the US ___ ___ are nonprofit, member owned cooperatives that offer most banking services
credit unions
a letter of credit is a promise to
pay the seller a given amount if certain conditions are met
banking has to be seen today as
global in nature
the organization responsible for funding international economic development is
the world bank
Name the nonbank financial institutions
- pension funds
- bokerage firms
- insurance companies
An independant agency of the US goverment that insures bank deposits is the
FDIC
S&L was origionally set up to
promote home ownership
An independant agency of the US goverment that insures bank deposits is called the ___
federal deposit insurance corporation
What services are provided by nonbanks
sell insurance
bokerage services
financia services
