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Economics > Money, Banking, and the FED > Flashcards

Money, Banking, and the FED Flashcards

1
Q

money with an alternative use

A

Commodity money

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2
Q

Examples of commodity money

A

Buckskins, compressed tea wampun shells, bricks, tobacco

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3
Q

Money by government decree (money with no intrinsic value)

A

Fiat money

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4
Q

Examples of fiat money

A

US dollar, all modern paper currency, digital, value

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5
Q

Money made of precious metals

A

Specie money

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6
Q

Examples of specie money

A

Austrian Talers, Spanish Pesos, South African Kruggerands

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7
Q

Standard unit of value of a country’s coinage

A

Monetary Unit

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8
Q

6 Characteristics of money

A

Money must be:
1. durable
2. Portable
3. divisible into smaller parts
4. available
5. limited supply
6. University accepted

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9
Q

3 functions of money

A

Money is a:
1. medium exchange
2. unit of account
3. store of value

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10
Q

M1 includes:

A

coins, paper currency, checking and savings account (> $4 trillion)

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11
Q

M2 includes everything in M1 plus…

A

CDs under 100k, mutual funds with less than 1 year maturity class (> $20 trillion)

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12
Q

How do banks increase the money in circulation

A

Banks can only loan out 90% of what customers deposit, except the 10% Reserve Requirement set by the FED

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13
Q

When and why did Congress create the FDIC

A
  1. If your bank goes bankrupt, FDIC will refund your money up to $250,000 per account
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14
Q

Minimum cash the bank can keep on hand. the FED pays banks interest on this money it holds for banks

A

Required reserves

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15
Q

Additional cash a bank keeps on hand.

A

Excess reserves

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16
Q

If the Fed ups the interest rate it gives banks on excess reserves, it will give banks incentive to:

A

raise the rates they charge for consumer loans

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17
Q

Government securities are

A

Government bonds

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18
Q

The federal funds interest rate is for ____ lending to ______

A

the banks, the banks

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19
Q

The discount rate is for ____ lending to ____

A

the FED, banks

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20
Q

The prime interest rate is for ____ lending to ___

A

the banks, the customers

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21
Q

A loan contract between a lender and a borrower for borrowed funds to be paid back plus interest within a maturity rate

A

Bond

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22
Q

Who can issue bonds

A

Businesses and governments

23
Q

If you issue a bond, you are a

A

borrower

24
Q

If you buy a bond, you are

A

Lender

25
Q

How do you know if a bond is profitable

A

Current yield will help determine the money you are going to make on any investment

26
Q

How do you know if bond is risky

A

Standard + Poors, Moody’s, + Fitch
Based on the firm’s credit history, past profits, current financial health

27
Q

How many branch banks

A

12 districts

28
Q

What district are we in

A

Atlanta, 6

29
Q

Who owns Fed

A

Member banks

30
Q

Who has the authority to regulate the Fed

A

Congress

31
Q

Who is the current Fed chairperson

A

Jerome Powell

32
Q

Who appoints the chairperson

A

President

33
Q

Who approves these appointments

A

Senate

34
Q

What economic indicator does the Fed use to control inflation and unemployment in the US

A

Interest rate

35
Q

When banks lower interest rates

A

Expansionary money policy

36
Q

When banks raise interest rates to discourage spending

A

Contractionary money policy

37
Q

What does fed use expansionary money policy

A

When there is high unemployment

38
Q

What does fed use contractionary money policy

A

When there is high inflation

39
Q

What three groups borrow money by issuing bonds

A
  1. Corporations
  2. Nonprofits
  3. Governments
40
Q

If bond is rated low, what 2 ways could a borrower compensate an investor for the risk

A
  1. raise the interest price
  2. lower the purchase price
41
Q

junk bond

A

high yield, low rating, high interest rates

42
Q

What causes gov to issue bonds

A

When. gov overspends

43
Q

federal gov bonds you can invest in with small amounts of money

A

savings bonds

44
Q

fed gov bonds you can invest in, maturity dates 1-30 years

A

treasury notes and bons

45
Q

fed gov bonds you can invest in for a very short time periods

A

T-Bills

46
Q

bond issued by a city or state

A

Municipal bond

47
Q

is municipal bond safe

A

no cities are more likely to go bankrupt

48
Q

If interest rates fall, what happens to prices of existing bonds

A

Prices rise

49
Q

If interest rates rise, what happens to prices of existing bonds

A

Prices fall

50
Q

A seat on the Board of Governors comes open every ____ years and their terms are for ____ years

A

2, 14

51
Q

Is the fed independent or dependent

A

independent

52
Q

fed main job

A

Push interest rate down and up

53
Q

What does FOMC do

A

Decides to change interest rates or not

Economics (7 decks)

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