Money and Banking Flashcards
1
Q
is anything that people will accept as payment for goods and services
A
Money
2
Q
Money performs three important functions.
A
(medium of exchange, standard of value, store of value)
3
Q
is the exchange of goods and services without using money.
A
Barter
4
Q
A medium of exchange is a mean through which goods and services can be exchanged
A
A medium of exchange
5
Q
determines the economic worth in the exchange process.
A
A standard of value
6
Q
is something that holds its value over time.
A
A store of value
7
Q
is a sustained rise in the general level of prices.
A
Inflation
8
Q
One situation where money does not function well as a store of value is when the economy experiences .
A
significant inflation
9
Q
Physical Properties:
A
Durability
Portability
Divisibilities
Uniformity
10
Q
Economic Properties
A
Scarcity
Acceptability
Stability of Value
11
Q
Money Draws its value from three possible resources
A
Commodity money
Representative money
Fiat money
12
Q
derives its value from the type of material it is consumed.
A
Commodity money
13
Q
The most common form of commodity money throughout history has been coins made from
A
precious metals.
14
Q
is paper money back by something tangible—-gold or silver– that gives it value.
A
Representative money
15
Q
The earliest forms of representative money were seen in the
A
Middle Ages
16
Q
is declared by the government and accepted by citizens to have worth
A
Fiat Money
17
Q
The value of the U.S. dollar was linked to the value of gold until
A
1971
18
Q
is paper money and coins.
A
Currency
19
Q
Checking accounts are called
A
demand deposits.
20
Q
is savings accounts, and time deposits that can be converted into cash relatively easily.
A
Near money
21
Q
Most demand deposits are ________________ that can be converted into currency simply by writing a check
A
non interest-bearing checking accounts
22
Q
Traveler’s checks are also considered
A
demand deposits,
23
Q
accounts, are interest-bearing savings accounts against which drafts may be written.
A
Negotiable Order of Withdrawal (NOW)
24
Q
are funds that people place in a financial institution for a specific period of time in return for a higher interest rate which are often placed in a certificate of deposit.
A
Time deposits
25
place restrictions on the number of transactions you can make in a month and require you to maintain a certain balance in the account in order to receive a higher rate of interest.
Money market accounts
26
Economists use various instruments to measure the money supply, but the most often cited are .
M1 and M2
27
is the narrowest measure of the money supply, consisting of currency, demand deposits, and other checkable deposits.
M1
28
The element of are referred to as liquid assets, which means that they are or can easily become currency,
M1
29
is a broader measure of the money supply, consisting of M1 plus various kinds of near money.
M2
30
includes savings accounts, small-denominational time deposits, and money market mutual funds.
M2
31
Modern banking arose in in the late Middle Ages
Italy
32
is the practice of holding only a fraction of the money deposited in a bank and lending the rest.
Fractional reserve banking
33
A state bank is a bank chartered by a
state government.
34
was the Secretary of Treasury in 1789.
Alexander Hamilton
35
Hamilton was a leading ____ who believed in a strong central government
Federalist
36
Hamilton argued that the __ implied that the federal government had the authority to create a national bank to carry out its duty to regulate currency
Constitution
37
was chartered in 1791
The First Bank of the US
38
Congress finally agreed to charter ___ in 1816.
the Second Bank of the United States
39
was an outspoken critic who mistrusted banks with paper money
President Andrew Jackson
40
During his period, all banks were state banks, each of which issued its own paper currency, called ____
bank notes.
41
Some of these banks were located in ___ to discourage people from redeeming it
remote areas
42
These U.S. bank notes were called
greenbacks.
43
In 1863, Congress passed the_____ , which led to the creation of a system of national banks.
National Banking Act
44
The act provided for a ____ backed by the US Treasury bonds and regulated the minimum amount of capital required for national banks as well as the amount of reserves necessary to back the currency.
national currency
45
In 1900, the government officially adopted the ___
gold standard.
46
The ____ is a system that backs the basic monetary unit with a set amount of gold.
gold standard
47
In 1913, Congress passed the ____ which established the Federal Reserve System- a true central bank.
Federal Reserve Act
48
The Fed. consists of _____
12 regional banks with a central decision-making board.
49
provides financial services to the federal government, makes loans to banks that serve the public, issues Federal Reserve notes as the national currency, and regulates the money supply to ensure that money retains its purchasing power
The Fed.
50
Part of FDR’s New Deal program was the _____
The act instituted reforms such as regulating interest rates that banks could pay and prohibiting banks from selling stock.
Banking Act of 1933
51
The ___ provided federal insurance so that if a bank failed, people would no longer lose their money.
Federal Deposit Insurance Corporation (FDIC
52
The term__ is used to refer to almost any kind of financial institutions that takes in deposits and makes loans, helping individuals, businesses, and gov. to manage their money.
bank
53
The goal of a bank is to ____
earn a profit.
54
All financial institutions receive a___ from the government, either state or federal.
charter
55
____are the oldest form of banking and are the financial institutions most commonly thought of as banks.
Privately owned commercial banks
56
___ were initially established to provide loans to businesses
Commercial banks
57
provide basic banking services; investment banks bought and sold assets through the financial markets.
Commercial banks
58
provide a wide range of services, including checking, savings, loans, investment assistance, and credit cards to both businesses and individual consumers.
Commercial banks
59
___ led to a wave of mergers and consolidations, reducing the number of commercial banks from over 12,000 in 1990 to about 7,500 in 2005
Deregulation
60
The ____ insures all commercial banks based in the United States.
FDIC
61
All national commercial banks belong to the ___
Federal Reserve System.
62
____ began in the United States in the 1830s
Savings and loan associations (S&Ls)
63
They (S&Ls) were originally chartered by individual states as mutual societies for two purposes--- ____
to take savings deposits and provide home mortgage loans.
64
In 1933, the federal government began charting S&Ls, and in 1934 the government established the ____
Federal Savings and Loans Insurance Corporation
65
Many savings institutions raise financing through the sale of ___ , just as commercial banks do.
stock
66
The first credit union in the United States began in ___ as state-chartered institutions
1909
67
_______ created a system of federally chartered credit unions
****The Federal Credit Union Act of 1934
68
Most credit unions have deposits insurance through the ___ , an organization similar to the FDIC.
National Credit Union Association (NCUA)
69
The major difference between credit unions and other financial institutions is that credit unions have ___.
membership requirements
70
___ are places where money can be bought and sold
Banks
71
By using these services, customers are able to do three things:
Store Money
Earn Money
Borrow Money
72
You can store important papers and valuables through the use of a ____
safe deposit box.
73
One common loan a bank makes is a ___
mortgage
74
So if the borrower ____ (stops making payments) the lender takes control of the property.
defaults
75
__ are issued by banks to users who are borrowers
Credit cards
76
___ tightly regulated the amount of interest that banks could pay on deposits and could charge on loans.
The Banking Act of 1933
77
___ in the 1980’s and 1990’s ended these restrictions and brought major changes to the banking industry.
Deregulation
78
______ lifted the last restriction from the Act of 1933 that had prevented banks, insurance companies, and investment companies from selling the same products and competing with one another.
This change allowed banks to sell stocks, bonds, and insurance.
The Financial Services Act of 1999
79
Real estate prices ballooned, in part because of
Iax lending standards.
80
The banks and other financial companies would bundle the mortgages and sell them as ____ , an individual similar to a bond.
mortgage-backed securities
81
The easy profits encouraged banks to generate more ___ by lowering their lending standard further, which drove house prices even higher.
Mortgages
82
___, particularly computer technology, has changed the way customers use banks, producing a system generally referred to as electronic banking
`Technology
83
Banks have begun using ___ , devices that allow bank customers to make deposits, withdrawals, and transfers and check account balances at any time without seeing a bank offer
automated teller machines (ATM)
84
___ are the oldest and most familiar of the developments in electronic banking.
ATMs
85
In order to use one you must have a personal ___ for your ATM/Debit card.
identification number (PIN)
86
Debit Cards are sometimes called ___.
check cards
87
These cards are sometimes called prepaid cards
stored value cards
88
____ allows customers who have set up accounts with a bank to perform practically every transaction without setting foot in a bank.
Electronic banking
89
_____ is a crime in which one person fraudulently uses another’s identity to obtain credit or to access financial accounts.
Identity theft can be accomplished easily and there is little risk of getting caught
Identity Theft
90
is the measure of your dependability to repay a loan
Creditworthiness
91
is a measure of your financial responsibility.
Character
92
is a measure of a consumer’s ability to repay a debt on time.
Capacity
93
___ is a measure of the value of things a consumer owns that could be sold or cashed in to repay a loan
Stocks, Bonds, Buildings, land are examples of __
Capital
94
A person’s record of paying bills and debts over time is one's
credit history
95
A consumers credit rating is the measure of a person’s
creditworthiness.
96
___ is based off of Making Payments On Time, current debt, other credit history, recent applications for credit, and type of credit used.
Credit Rating
97
___ is a system that assigns a number, or score, to each consumer indicating whether this person is a good or bad credit risk.
Credit Scoring
98
The score is based on a formula that was originally developed by the___ in the 1950
Fair Isaac Company (FICO)
99
___ scores are used to set interest rates on some loans
FICO
100
Most experts recommend that consumers review their credit files______ to determine whether mistaken information appears in them
at least once per year
