Money and Banking

Question 1

______ is anything that people will accept as payment for goods and services

Answer 1

money

Question 2

money perform three important functions:

Answer 2

medium of exchange
standard of value
store of value

Question 3

______ is a means through which goods and services can be exchanged

Answer 3

medium of exchange

Question 4

______ determines the economic worth in the exchange process

Answer 4

standard of value

Question 5

______ is something that holds its value over time

Answer 5

store of value

Question 6

______ is the exchange of goods and services without using money

Answer 6

barter

Question 7

______ is a sustained rise in the general level of prices

Answer 7

inflation

Question 8

Physical Properties of Money:

Answer 8

durability
portability
divisibility
uniformity

Question 9

Economic Properties of Money;

Answer 9

stability of value
scarcity
acceptability

Question 10

money draws its value from three possible sources:

Answer 10

commodity money
representative money
fiat money

Question 11

______ derives its value from the type of material from which it is composed

Answer 11

commodity money

Question 12

______ is paper money back by something tangible-gold or silver-that gives it value

Answer 12

representative money

Question 13

______ is declared by the govt and accepted by citizens to have worth

Answer 13

flat money

Question 14

the value of the US dollar was linked to the value of gold until ______

Answer 14

1971

Question 15

______ is paper money and coins

Answer 15

currency

Question 16

checking accounts are called ______

Answer 16

demand deposits

Question 17

______ is savings accounts and time deposits and can be converted into cash relatively easily

Answer 17

near money

Question 18

______ are interest-bearing savings accounts against which drafts may be written

Answer 18

negotiable order of withdrawal (NOW) accounts

Question 19

______ 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 (CD)

Answer 19

time deposits

Question 20

______ 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

Answer 20

money market accounts

Question 21

______ is the narrowest measure of the money supply, consisting of currency, demand deposits, and other checkable deposits

Answer 21

M1

Question 22

the elements of M1 are referred to as ______, which means that they are or can easily become currency

Answer 22

liquid costs

Question 23

_______ is a broader measure of the money supply, consisting of M1 plus various kinds of near money

Answer 23

M2

Question 24

modern banking arose in ______ in the late Middle Ages

Answer 24

Italy

Question 25

______ is the practice of holding only a fraction of the money deposited in a bank and lending the rest

Answer 25

fractional reserve banking

Question 26

______ is a bank chartered by a state government

Answer 26

state bank

Question 27

Who was the Secretary of Treasury in 1789?

Answer 27

Alexander Hamilton

Question 28

Who was an outspoken critic who mistrusted banks with paper money?

Answer 28

President Andrew Jackson

Question 29

during his period, all banks were state banks, each of which issued its own paper currency, called ______

Answer 29

bank notes

Question 30

the govt’s first solution to this problem was to issue a new currency backed by govt bonds, these US bank notes were called

Answer 30

greenbacks

Question 31

in 1863, Congress passed the National Banking Act, which led to the creation of a system of national banks the act provide for a national currency backed by ______ and regulated the minimum amount of capital required for national banks as well as the amount of reserves necessary to back the currency

Answer 31

US Treasury Bonds

Question 32

in ______, the govt officially adopted the gold standard

Answer 32

1900

Question 33

the ______ is a system that backs the basic monetary unit with a set amount of gold

Answer 33

gold standard

Question 34

In 1913, Congress passed the ______, which established the Federal Reserve System- a true central bank

Answer 34

Federal Reserve Act

Question 35

The fed consists of ______ regional banks with a central decision- making board

Answer 35

12

Question 36

this act installed reforms such as regulating interest rates that banks could not pay and prohibiting banks from selling stock

Answer 36

Banking Act of 1933

Question 37

The ______ provided federal insurance so that if a bank failed people would no longer lose their money

Answer 37

Federal Deposit Insurance Corporation

Question 38

The term ______ is used to refer to almost any kind of financial institution that takes in deposits and makes loans helping individuals, businesses, and governments to manage their money

Answer 38

bank

Question 39

______ are the oldest form of banking and are the financial institutions most commonly thought of as a bank

Answer 39

privately owned commercial banks

Question 40

______ began in the United States in the 1830s and were originally chartered by individual states as mutual societies for two purposes-- to take savings deposits and provide home mortgage loans

Answer 40

Saving and Loan Associations

Question 41

______ created a system of federally chartered credit unions

Answer 41

Federal Credit Union Act

Question 42

what insures deposits in credit unions?

Answer 42

NCUA

Question 43

What is the major difference between credit unions and other financial institutions?

Answer 43

membership

Question 44

banks are places where money can be bought and sold | by using these services, customers are able to do three things:

Answer 44

store money earn money borrow money

Question 45

one common loan a bank makes is a ______

Answer 45

mortgage

Question 46

if the borrower of money stops making payments they go into ______

Answer 46

default

Question 47

______ are issued by banks to users who are borrowers

Answer 47

credit cards

Question 48

the ______ 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

Answer 48

Financial Services Act

Question 49

real estate prices ballooned, in part because of ______, or the banks and other financial companies would bundle the mortgages and sell them as mortgage-backed securities, an investment similar to a bond

Answer 49

lax lending standards

Question 50

a ______ is a contract a corporation issues that promises to repay borrowed money, plus interest, on a fixed schedule

Answer 50

bond

Question 51

______ has changed the way customers use banks, producing a system generally referred to as electronic banking

Answer 51

technology

Question 52

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 officer

Answer 52

ATMs

Question 53

______ represents money that the holder has on deposit with the issuer

Answer 53

stored-value card

Question 54

debit cards are sometimes called ______

Answer 54

check cards

Question 55

______ allows customers who have set up accounts with a bank to perform practically every transaction without setting for in a bank

Answer 55

electronic banking

Question 56

______ is a crime in which one person fraudulently uses another’s identity to obtain credit or to access financial accounts

Answer 56

identity theft

Question 57

three major credit-reporting agencies:

Answer 57

Experian Equifax Trans-Union

Question 58

______ is the measure of your dependability to repay a loan

Answer 58

creditworthiness

Question 59

______ is a measure of your financial responsibility

Answer 59

character

Question 60

______ is a measure of a consumer’s ability to repay a debt on time

Answer 60

capacity

Question 61

______ is a measure of the value of things a consumer owns that could be sold or cashed in to repay a loan

Answer 61

capital

Question 62

examples of capital:

Answer 62

stocks, bonds, buildings, and lands

Question 63

a person’s record of paying bills and debts over time is one’s ______

Answer 63

credit history

Question 64

a consumer’s ______ is the measure of a person’s creditworthiness

Answer 64

credit rating

Question 65

______ is a system that assigns a number, or score, to each consumer indicating whether this person is a good or bad credit risk

Answer 65

credit scoring

Question 66

the credit score is based on a formula that was originally developed by the ______

Answer 66

FICO