Money, Banking, And Finance

Question 1

What is the currency of money?

Answer 1

Actually paper bills and coins accepted in a transaction

Question 2

Fiat money?

Answer 2

Legal tender of a country/government notes backed by government authority or law

Question 3

What are the three functions of money?

Answer 3

Medium of exchange, store of value, and standard of value (unit of accord)

Question 4

Medium of exchange

Answer 4

• means through which goods and services can be exchanged
• allows for the precise and flexible pricing of goods and services
• makes economic transactions convenient

Question 5

Store of value

Answer 5

• something that holds its value over time

- can be stored and accepted wherever/whenever it’s presented

Question 6

Standard of value (unit of accord)

Answer 6

• determines the economic worth in the exchange process

- measures the relative cost of goods and services

Question 7

What are the physical characteristics of money?

Answer 7

Durable, portable, divisibility, and uniformity

Question 8

Durable money?

Answer 8

Last through many transactions

Question 9

Portable money?

Answer 9

Easy to carry/transport

Question 10

Divisibility money?

Answer 10

Change can be made to allow for flexible pricing

Question 11

Uniformity money?

Answer 11

Features are recognizable difficult to counterfeit

Question 12

What are the economic characteristics of money?

Answer 12

Stability of value, scarcity, and acceptability

Question 13

Stability of value

Answer 13

Amount of goods/services bought with a certain amount of money shouldn’t change quickly

Question 14

Scarcity

Answer 14

Money must be scarce in order to have value

Question 15

Acceptability

Answer 15

Both parties must agree that it is an acceptable medium of exchange

Question 16

Financial institutions ex

Answer 16

Banks(aka commercial banks), credit unions, and investment firms

Question 17

What is money?

Answer 17

Anything people will accept in exchange for goods and services

Question 18

Financial institutions

Answer 18

Allows for the transfer of funds between people

Question 19

Banks (aka commercial banks)

Answer 19

• institution for receiving, keeping, and lending money
• initially established to provide loans to businesses
• today, banks offer a range of services

Question 20

What are the range of services that banks offer

Answer 20

Checking accounts, saving accounts, loans, investment assistance, and credit cards

Question 21

Credit union

Answer 21

• cooperative saving and lending institutions
• specialize in home mortgages and auto loans
• have membership requirement

Question 22

Investment firms

Answer 22

Collect funds from savers and interest funds in loans, stock market, and other financial assets

Question 23

Functions of financial institutes

Answer 23

Savings, checking, loans, investments, and trust funds

Question 24

Savings

Answer 24

• income that is not used for consumption
• allows you to save money for future expenses
• funds are available for the bank to lend in exchange for a small payment (aka interest)

Question 25

Checking

Answer 25

- account used to store money | - typically used for immediate expenses

Question 26

Loans

Answer 26

- borrowed money to repaid with interest | - usually for large purchases (cars, homes, college tuition, etc)

Question 27

Investments

Answer 27

- Use of income today for future benefit | - economic and personal

Question 28

Economic

Answer 28

Money lent to businesses

Question 29

Personal

Answer 29

Individuals putting savings into financial assets

Question 30

Trust funds

Answer 30

- funds held for a specific purpose to be used at a future gate - typically set up to protect against financial hardship

Question 31

What are stock indexes?

Answer 31

They measure and report the change in prices of stocks and health of market

Question 32

Bull market

Answer 32

Prices steadily rise

Question 33

Bear market

Answer 33

Prices steadily decline

Question 34

Mutual fund

Answer 34

- investment company gathers money from individual investors and purchases a wide range of financial assets (like Cabot school districts) - represent investments of all financial assets held by funds

Question 35

Stocks

Answer 35

- shares of ownership in a corporation | - most are bought as a financial investment with the expectation that prices will rise and can be resold for profit

Question 36

Bonds

Answer 36

- loan given to a corporation or government by individuals | - contract with promise to repay borrowed money plus interest on a fixed schedule

Question 37

Pension fund

Answer 37

- allows employees to save money for retirement - sometimes includes contributions from employers - invests pooled contributions to increase value and provide workers with more money when they retire

Question 38

What is a timed deposit?

Answer 38

- savings in a financial institution for s specific period of time - higher interest rates than savings accounts - CDs(certificate of deposit)

Question 39

what is the most common type of timed deposit?

Answer 39

CDs (certificate of deposit)