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Economics > Money & Banking > Flashcards

Money & Banking Flashcards

1
Q

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

A

Money

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2
Q

Money performs _____ important functions

A

three

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3
Q

Money must serve as a ______ __ ________

A

medium of exchange

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4
Q

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

A

medium of exchange

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5
Q

______ is the exchange of goods and services without using money

A

Barter

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6
Q

A ________ __ _____ determines the economic worth in the exchange process

A

standard of value

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7
Q

A _____ __ _____ is something that holds its value over time

A

store of value

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8
Q

One situation where money does not function well as a store of value is when the economy experiences significant _________

A

inflation

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9
Q

_________ is a sustained rise in the general level of prices

A

Inflation

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10
Q

Physical Properties

A

Durability
Portability
Divisibility
Uniformity

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11
Q

Economic Properties

A

Stability of Value
Scarcity
Acceptability

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12
Q

Money draws its value from three possible sources

A

Commodity money
representative money
Fiat money

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13
Q

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

A

Commodity money

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14
Q

The most common form of commodity money throughout history has been _____ made from precious metals

A

coins

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15
Q

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

A

Representative money

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16
Q

The earliest forms of representative money were seen in the ______ ____

A

Middle Ages

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17
Q

Merchants, goldsmiths, and moneylenders began issuing ________ that promised to pay a certain amount of gold or silver

A

receipts

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18
Q

These practices signal the beginning of widespread modern use of _____ _____

A

paper money

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19
Q

____ _____ is declared by the government and accepted by citizens to have worth

A

Fiat money

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20
Q

The value of the US dollar was linked to the value of ____ until 1971

A

gold

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21
Q

In ____ _____, coins contain only a token amount of precious metal that is worth far less than the face value of these coins

A

fiat money

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22
Q

A crucial role of the government in maintaining the value of fiat money is controlling its ______ - in other words , maintain its ________

A

supply

scarcity

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23
Q

________ is paper money and coins

A

Currency

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24
Q

Checking accounts are called ______ ________

A

demand deposits

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25
Q

Demand deposits because funds in checking accounts can be converted into currency “__ ______”

A

on demand

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26
Q

____ _____ is savings accounts, and time deposits that can be converted into cash relatively easily

A

Near money

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27
Q

Most ______ ________ are non interest-bearing checking accounts that can be converted into currency simply by writing a check

A

demand deposits

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28
Q

_________ _______ are also considered demand deposits

A

Travelers checks

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29
Q

__________ _____ __ __________ accounts, are interest-bearing savings accounts against which drafts may be written

A

Negotiable order of withdrawal (NOW)

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30
Q

____ _____, such as savings accounts and other interest- bearing accounts, cannot be used directly to make transactions

A

Near money

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31
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 ___________ __ _______

A

Time deposits

certificate of deposit (CD)

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32
Q

_____ ______ ________ 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

A

Money market accounts

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33
Q

Economists use various instruments to measure the money supply, but the most often cited are __ & __

A

M1 & M2

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34
Q

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

A

M1

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35
Q

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

A

liquid assets

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36
Q

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

A

M2

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37
Q

__ includes savings accounts, small-denomination time deposits, and money market mutual funds

A

M2

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38
Q

Modern banking arose in _____ in the late Middle Ages

A

Italy

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39
Q

_______ ________ stored money or valuables for wealthy people and issued receipts that promised to return the property on demand

A

Italian merchants

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40
Q

This was the beginning of __________ _______ _______ - the practice of holding only a fraction of the money deposited in a bank and lending the rest

A

fractional reserve banking

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41
Q

A state bank is a bank _________ by a state government

A

chartered

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42
Q

_________ _________ was the Secretary of Treasury in 1789

A

Alexander Hamilton

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43
Q

Hamilton was a leading _______ who believed in a strong central government

A

Federalist

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44
Q

_________ argued that the Constitution implied that the federal government had the authority to create a national bank to carry out its duty to regulate currency

A

Hamilton

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45
Q

The _____ ____ __ ___ __ was chartered in 1791

A

First Bank of the US

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46
Q

Congress finally agreed to charter the Second Bank of the United States in ….

A

1816

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47
Q

President ______ _______ was an outspoken critic who mistrusted banks with paper money

A

Andrew Jackson

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48
Q

During his period, all banks were state banks, each of which issued its own paper currency, called ____ _____

A

bank notes

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49
Q

Some of these banks were located in _______ ______ to discourage people from redeeming it

A

remote areas

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50
Q

It was this practice, along with the questionable quality of many bank notes, that resulted in the term _______ ____

A

wildcat bank

51
Q

The government’s first solution to this problem was to issue a new currency backed by ___________ ______

A

government bonds

52
Q

These US bank notes were called ___________

A

greenbacks

53
Q

In 1863 Congress passed the _______ _______ ___ which led to the creation of a system of national banks The act provided for a national currency backed by 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

A

National Banking Act

54
Q

In ____ the government officially adopted the gold standard

A

1900

55
Q

The ____ ________ is a system that backs the basic monetary unit with a set amount of gold

A

gold standard

56
Q

In 1913 Congress passed the _______ _______ ____ which established the Federal Reserve System - a true central bank

A

Federal Reserve Act

57
Q

The Fed consists of __ regional banks with a central decision-making board

A

12

58
Q

The Fed provides financial services to the federal government, makes loans to banks that serve the public, issues ________ _______ ______as the national currency, and regulates the money supply to ensure that money retains its purchasing power

A

Federal Reserve notes

59
Q

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

A

Banking Act of 1933

60
Q

The ________ _______ _________ ____________provided federal insurance so that is a bank failed, people would no longer lose their money

A

Federal Deposit Insurance Corporation

61
Q

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

A

bank

62
Q

The goal of a bank is to…

A

earn a profit

63
Q

All financial institutions receive a _______ from the government, either state or federal

A

charter

64
Q

__________ ______ ___________ ______are the oldest form of banking and are the financial institutions most commonly thought of as banks

A

Privately owned commercial banks

65
Q

__________ _____were initially established to provide loans to businesses

A

Commercial banks

66
Q

__________ ______ provide basic banking services; investment banks bought and sold assets through the financial markets

A

Commercial banks

67
Q

Commercial banks provide a wide range of services, including ….

A

checking, savings, loans. investment assistance, and credit cards to both businesses and individual consumers

68
Q

_____________ led to a wave of mergers and consolidations, reducing the number of commercial banks from over 12000 in 1990 to about 7500 in 2005

A

Deregulation

69
Q

The ____ insures all commercial banks based in the United States

A

FDIC

70
Q

All national commercial banks belong to the _______ _______ _______

A

Federal Reserve System

71
Q

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

A

Savings & loans associations

72
Q

In 1933 the federal government began charting S&Ls and in 1934 the government established the _______ _______ ___ _____ _________ ____________

A

Federal Savings & Loans Insurance Corporation

73
Q

In 1989 following the S&L crisis the _____ was abolished and the ____ began insuring S&Ls

A

FSLIC FDIC

74
Q

Many savings institutions raise financing through the____ __ _____ just as commercial banks do

A

sale of stock

75
Q

The idea for ______ ______ began in Europe in the mid-1800s

A

credit unions

76
Q

The first credit union in the United States began in ____ as state-chartered institutions

A

1909

77
Q

The ________ _______ _____ ___ __ ____ created a system of federally chartered credit unions

A

Federal Credit Union Act of 1934

78
Q

Most credit unions have deposit insurance through the _________ ______ ______ ___________ an organization similar to the FDIC

A

National Credit Union Association (NCUA)

79
Q

The major difference between credit unions and other financial institutions is that credit unions have __________ _____________

A

membership requirements

80
Q

______ are places where money can be bought and sold

A

Banks

81
Q

By using these services customers are able to do three things:

A

Store money
Earn money
Borrow money

82
Q

You can store important papers and valuables through the use of a ….

A

safe deposit box

83
Q

One common loan a bank makes is a …

A

mortgage

84
Q

The lender and the borrower agree on a time period for the loan (up to __ years) and an interest rate to be paid to the lender

A

30

85
Q

In this arrangement the real estate property acts as the __________

A

collateral

86
Q

So if the borrower ________ (stops making payments) the lender takes control of the property

A

defaults

87
Q

_______ ______ are issued by banks to users who are borrowers

A

Credit cards

88
Q

If you don’t pay it back within a month, you’ll owe the bank extra in …

A

interest

89
Q

The ________ ___ __ ____ tightly regulated the amount of interest that banks could pay on deposits and could charge on loans

A

Banking Act of 1933

90
Q

_____________ in the 1980’s and 1990’s ended these restrictions and brought major changes to the banking industry

A

Deregulation

91
Q

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

A

Financial Services Act of 1999

92
Q

This change allowed banks to sell …

A

stocks, bonds, and insurance

93
Q

Real estate prices ballooned in part because of ___ ________ _________

A

lax lending standards

94
Q

The banks and other financial companies would bundle the mortgages and sell them as ________ ______ ___________ , an investment similar to a bond

A

mortgage-backed securities

95
Q

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

A

bond

96
Q

The easy profits encouraged banks to generate more __________ by lowering their lending standards further, which drove house prices even higher

A

mortgages

97
Q

Technology, particularly computer technology, has changed the way customers use banks, producing a system generally referred to as…

A

electronic banking

98
Q

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

A

automated teller machines (ATM)

99
Q

Other innovation include _____ _____, that can be used like an ATM card or a check

A

debit cards

100
Q

A ______-_____ card represents money that the holder has on deposit with the issuer

A

stored-value

101
Q

____ are the oldest and most familiar of the developments in electronic banking

A

ATMs

102
Q

In order to use one you must have a _________ _______________ -________ for your ATM/ Debit card

A

personal identification number (PIN)

103
Q

Like ATM cards, ______ _______ can be used to withdraw cash and make other transactions at ATM machines

A

debit cards

104
Q

Debit cards are sometimes called ______ ______

A

check cards

105
Q

Stored Value Cards

These cards are sometimes called _______ ______

A

prepaid cards

106
Q

___________ _______ allows customers who have set up accounts with a bank to perform practically elery transaction without setting foot in a bank

A

Electronic Banking

107
Q

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

A

Identity theft

108
Q

________ ______ can be accomplished easily and there is little risk of getting caught

A

Identity theft

109
Q

All the identity thief really needs is your ______ ________ _______

A

Social Security number

110
Q

The best way to protect yourself from identity theft is to avoid letting other people see your _________ information unless they have a legit reason to see it

A

financial

111
Q

Shred all bank statements, bills, or other documents that include _______ or ______ ________ numbers

A

account or Social Security

112
Q

If you discover your identity has been stolen follow these steps:

  • Contact each of the three major credit-reporting agencies to have a “______ ______” placed on your account (Experian, Equifax, Trans-Union)
  • Contact each business that has extended credit to you and explain what has happened
  • Report your identity theft to law enforcement agencies
  • Contact the Federal Trade Commission’s ID theft hotline (877) 438-4338 or online
A

fraud alert

113
Q

________________ is the measure of your dependability to repay a loan

A

Creditworthiness

114
Q

________ is a measure of your financial responsibility

A

Character

115
Q

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

A

Capacity

116
Q

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

A

Capital

117
Q

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

A

credit history

118
Q

A consumers credit rating is the measure of a person’s ________________

A

creditworthiness

119
Q

______ ______ is based off making payments on time, current debt, other credit history, recent applications for credit, and type of credit used

A

Credit rating

120
Q

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

A

Credit Scoring

121
Q

The score is based on a formula that was originally developed by the ____ _____ _______ in the 1950

A

Fair Isaac Company

122
Q

____ ______ are used to set interest rates on some loans

A

FICO scores

123
Q

Most experts recommend that consumers review their credit files at least once per ____ to determine whether mistaken information appears in them

A

year

Economics (4 decks)

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