Reading Notes - Chapter 2

Question 1

virtual currency = ?

Answer 1

unregulated digital money issued and controlled by decentralised developers used for electronic payments

e.g., cryptocurrency

Question 2

cryptocurrency = ?

Answer 2

a decentralised and unregulated digital money that uses cryptocurrency to operate electronic payment transactions

Question 3

digital currency = ?

Answer 3

an electronic asset in digital form accepted for making payments for goods/services & debts

Question 4

bitcoin = ?

Answer 4

a cryptocurrency that uses a ledger system technology called the blockchain for handling transactions

Question 5

individual net worth = ?

Answer 5

the sum of an individual’s money, real assets & financial assets minus the individual’s debt obligations

Question 6

physical money = ?

Answer 6

coin, notes/paper used to purchase goods/services and settle debts

Question 7

when was the dollar adopted by US Congress?

Answer 7

1785

Question 8

bimetallic standard = ?

Answer 8

monetary standard based on two metals, usually silver & gold

Question 9

full-bodied money = ?

Answer 9

coins that contain the same value in metal as their face value

Question 10

how did money link with gold & silver?

Answer 10

gold & silver were used as a medium of exchange

Question 11

token coins = ?

Answer 11

coins containing metal of less value than their stated value

Question 12

when did gold production as a medium of exchange stop?

Answer 12

1933

Question 13

when was monetary gold prohibited in the US?

Answer 13

1934

Question 14

when were restrictions on gold exchange aleviated?

Answer 14

1975

Question 15

representative full-bodied money = ?

Answer 15

paper money fully backed by precious metal

Question 16

gold certificates = ?

Answer 16

certificates that could be used to redeem gold - ‘as good as gold’

Question 17

fiat money = ?

Answer 17

paper money proclaimed to be legal tender by the government for making payments and discharging debts

Question 18

credit money = ?

Answer 18

money backed by the creditworthiness and taxing capabilities of the issuer

Question 19

is fiat money a form of credit money?

Answer 19

yes

Question 20

deposit money = ?

Answer 20

electronic money backed by the creditworthiness of the depository institution that issued the deposit

Question 21

automatic transfer service accounts?

Answer 21

ATS accounts

provide for direct deposits to, and payment from checkable deposit accounts

where employers deposit employees’ salaries into; checking accounts

Question 22

debit cards = ?

Answer 22

provide for immediate direct transfer of deposit amounts

Question 23

MMMFs = ?

Answer 23

money market mutual funds

issue shares to customers and invest the proceeds in highly liquid, very short maturity, interest-bearing debt instruments

Question 24

credit cards = ?

Answer 24

provide predetermined credit limits to consumers when the cards are issued

Question 25

currency exchange rate = ?

Answer 25

value of one currency relative to another

Question 26

gross domestic output (GDP) = ?

Answer 26

a measure of the output of goods & services in an economy

Question 27

velocity of money (VM) = ?

Answer 27

the rate of circulation of the money supply

Question 28

what are the major types of money market securities?

Answer 28

treasury bill
commercial paper
negotiable certificate of deposits
banker’s acceptance
repurchase agreement
federal funds

Question 29

treasury bill = ?

Answer 29

short term debt obligation issued by the government

Question 30

commercial paper = ?

Answer 30

short term unsecured promissory note issued by high quality corporations

Question 31

negotiable CDs = ?

Answer 31

short term debt instrument issued by depository institutions

Question 32

bankers acceptance = ?

Answer 32

promise of future payment issued by a firm and guaranteed by a bank

Question 33

repurchase agreement = ?

Answer 33

short term debt security where the seller agrees to repurchase the security at a specific time & price

Question 34

federal funds = ?

Answer 34

short term loans typically for 1-day to 1-week made between depository institutions

Question 35

in 1944, what were exchange rates between currencies like?

Answer 35

they were fixed relative to the US dollar or gold

Question 36

when and how was the ‘euro’ originated?

Answer 36

in 1999, EU countries unified to create the euro currency which is administered by the european central bank