Lesson 32 - unit 7

Question 1

What services do banks render?

Answer 1

1. A safe place to keep money
2. ability to earn money by saving
3. encourage spending through checks and debit cards
4. A place to borrow money

Question 2

What are the benefits of saving?

Answer 2

1. Less reliant on debt
2. increased productivity through helping businesses to grow with loans
3. higher standard of living
4. ability to have higher quality items
5. enables investments that help the economy grow

Question 3

What term describes how banking activity creates wealth?

Answer 3

Multiple-deposit expansion.

Question 4

What is fractional reserve banking?

Answer 4

the practice of loaning out the majority of money that a bank has on a deposit and keeping only a small fraction on hand.

Question 5

What is credit?

Answer 5

The ability to carry debt.

Question 6

What is the FDIC and how does it help individual depositors?

Answer 6

The Federal Deposit Insurance Corporation is an independent agency established by congress that protects the money that people deposit.

Question 7

What is the term used for the price of money?

Answer 7

Interest,

Question 8

What is the difference between nominal interest rates and real interest rates?

Answer 8

Nominal interest rates are the stated rates that are charged. Real interest rates are the difference between nominal interest rates and inflation.