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U.S. Government > Test 6 Money and Banking > Flashcards

Test 6 Money and Banking Flashcards

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1
Q

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

A

money

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2
Q

Money performs 3 important purposes:

A

medium of exchange
standard of value
store of value

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3
Q

Money must serve as a _________________.

A

medium of exchange

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4
Q

what is a means through which goods and services can be exchanged?

A

medium of exchange

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5
Q

What is the exchange of goods and services without using money?

A

Barter

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6
Q

What determines the economic worth in the exchange process?

A

standard of value

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7
Q

what 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 ________

A

the economy experiences significant inflation

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9
Q

What is a sustained rise in the general level of prices?

A

inflation

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10
Q

What are the physical properties of money?**

A
  • durability
  • portability
  • divisibility
  • uniformity
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11
Q

What are the economic properties of money?

A
  • stability of value
  • scarcity
  • acceptability
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12
Q

Money draws its value from 3 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 _________.

A

coins made from precious metals

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15
Q

What is paper money backed by something tangible – gold or silver – that gives its value?

A

representative money

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16
Q

When were the earliest forms of representative money seen?

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

What 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 U.S. dollar was linked to _____________________ until ____

A

the value of gold

1971***

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21
Q

What is paper money and coins?

A

currency

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22
Q

checking accounts are called

A

demand deposits

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23
Q

Why are demand deposits called that?

A

funds in checking accounts can be converted to currency “on demand”

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24
Q

_____ _________ is savings accounts and time deposits than can be converted into cash relatively easily

A

near money

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25
Q

coins contain only a token amount of precious metal that is worth far less than the face value of those coins in ______

A

fiat money

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26
Q

a crucial role of the govt in maintaining the value of fiat money is ___________.

A

controlling its supply-in other words, maintain its scarcity

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27
Q

Most demand deposits are __________ that can be converted into currency simply by writing a check

A

noninterest-bearing checking accounts

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28
Q

traveler’s checks are also considered _________

A

demand deposits

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29
Q

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

A

Negotiable order of withdrawal (NOW)

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30
Q

What accounts cannot be used directly to make transactions?

A

near money, such as savings accounts and other interest-bearing accounts

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31
Q

What are funds that ppl 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)?

A

time deposits**

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32
Q

What places 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 interest rate?

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 ____ and ____

A

M1 and M2

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34
Q

M1 is the narrowest measure of the money supply, consisting of:***

A

currency
demand deposits
other checkable deposits

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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

M2 is a broader measure of the money supply, consisting of:

A

M1 plus various kinds of near money

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37
Q

M2 includes:

A

savings accounts
small-denominational time deposits
money market mutual funds

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38
Q

modern banking arose in _____ in the late Middle Ages

A

italy

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39
Q

Italian merchants stored money or valuables for wealthy people and issued ______ that promised to return the property on demand

A

receipts

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40
Q

What was receipting the beginning of?

A

fractional reserve banking

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41
Q

________ is 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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42
Q

bank chartered by a state government

A

state bank

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43
Q

was the Secretary of Treasury in 1789

A

Alexander Hamilton

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44
Q

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

A

federalist

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45
Q

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

A

Constitution

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46
Q

the First Bank of the US was chartered in

A

1791

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47
Q

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

A

1816

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48
Q

Who was an outspoken critic who mistrusted banks with paper money

A

President Andrew Jackson

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49
Q

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

A

bank notes

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50
Q

Why were some of these banks located in remote areas?

A

to discourage people from redeeming it

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51
Q

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

A

wildcat bank

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52
Q

the govt’s first solution to this problem was to issue a ________.

A

a new currency backed by govt bonds

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53
Q

these US bank notes were called

A

greenbacks

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54
Q

in 1863, Congress passed the __________, which led to the creation of a system of national banks

A

National Banking Act

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55
Q

the act provided 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

A

US Treasury bonds

56
Q

When did the govt officially adopt the gold standard?

A

1900

57
Q

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

A

gold standard

58
Q

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

A

federal reserve act

59
Q

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

A

12

60
Q

The fed provides _________ ___________ to the federal government, makes ______ to banks that serve the public, issues ________ _________ _________ as the national currency, and ________ the money supply to ensure that money retains its purchasing power.

A

financial services
loans
federal reserve notes
regulates

61
Q

Part of FDR’s new deal program was the __________.

A

Banking Act of 1933

62
Q

the act instituted reforms such as regulating _________ _____ that banks could pay and prohibiting banks from selling stock.

A

interest rates

63
Q

The ___________________________ provided federal insurance so that if a bank failed, people could no longer lose their money.

A

FDIC Federal Deposit Insurance Corporation

64
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

65
Q

The goal of a bank is to earn a _____.

A

profit

66
Q

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

A

charter

67
Q

_________ are the oldest form of banking and are the financial institutions most commonly thought of as banks.

A

privately owned commercial banks

68
Q

________ _______ were initially established to provide loans to businesses.

A

commercial banks

69
Q

________ _______ provide basic banking services; investment banks bought and sold assets through the financial markets

A

commercial banks

70
Q

Commercial banks provide a wide range of services including:

A 
checking
savings
loans
investment assistance
credit cards
71
Q

What led to a wave of mergers and consolidations, reducing the number of commercial banks from over 12,000 in 1990 to about 7,500 in 2005

A

deregulation

72
Q

What insures all commercial banks based in the US?

A

FDIC

73
Q

All national commercial banks belong to the ________ ________ _________.

A

federal reserve system

74
Q

____________ began in the US in the 1830s.

A

Savings and loan associations

75
Q

in 1933 the federal government began

A

charting S&Ls

76
Q

in 1934 the government established

A

the Federal Savings and Loan insurance corporation

77
Q

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

A

FSLIC

FDIC

78
Q

Many savings institutions raise financing through the sale of ______; just as commercial banks do

A

stock

79
Q

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

A

credit unions

80
Q

The first credit union in the US began in 1909 as

A

state-chartered institutions

81
Q

_______ created a system of federally chartered credit unions

A

Federal Credit Union Act of 1934

82
Q

Most credit unions have deposit insurance through the _______.

A

National Credit Union

83
Q

Most credit unions have deposit insurance through the ______________ an organization similar to the FDIC

A

National Credit Union Association (NCUA)

84
Q

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

A

membership requirements

85
Q

Banks are places where

A

money can be bought and sold

86
Q

One common loan a bank makes is a ________.

A

mortgage

87
Q

The lender and the borrower agree on a _________ for the loan (up to 30 yrs) and an ________ to be paid to the lender

A

time period

interest rate

88
Q

In this arrangement the real estate properly acts as the ________.

A

collateral

89
Q

So if the borrower ________ the lender takes control of the property

A

defaults(stops making payments)

90
Q

_______ are issued by banks to users who are borrowers

A

Credit cards

91
Q

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

A

extra in interest

92
Q

_______ tightly regulated the amount of interest that banks could pay on deposits and could charge on loans

A

The banking act of 1933

93
Q

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

A

Deregulation

94
Q

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

The financial services act of 1999

95
Q

This change allowed banks to sell:

A

stocks, bonds, and insurance

96
Q

_________ balanced, in part because of lax lending money

A

Real estate prices

97
Q

The banks and other financial companies would bundle the ________ and sell them as mortgage-backed securities, an investment similar to a bond

A

mortgages

98
Q

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

A

A bond

99
Q

________ encouraged banks to generate more mortgages by lowering their lending standards further, which drove house prices even higher

A

the easy profits

100
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)

101
Q

Other innovations include _______ that can be used like an ATM card or check

A

debit cards

102
Q

represents money that the holder has on deposit with the issuer

A

A stored-value card

103
Q

_______ are the oldest and most familiar of the developments of electronic banking

A

ATMs

104
Q

In order to use one you must have a _________ for you ATM/Debit card

A

personal identification number (PIN)

105
Q

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

A

debit cards

106
Q

Debit cards are sometimes called:

A

check cards

107
Q

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

A

Electronic banking

108
Q

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

A

identity theft

109
Q

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

A

identity theft

110
Q

What does an identity thief need?

A

SSN

111
Q

What is the best way to avoid identity theft?

A

avoid letting ppl see your financial info unless they actually need to

112
Q

Shred all bank statements, bills, or other documents that include

A

account or Social Security numbers

113
Q

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

A

Contact each of the three major credit-reporting agencies to have a “fraud alert” 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.

114
Q

is the measure of your dependability to repay a loan

A

creditworthiness

115
Q

is a measure of your financial responsibility

A

character

116
Q

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

A

capacity

117
Q

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

A

capital

118
Q

examples of capital

A

Stocks, Bonds, buildings, land

119
Q

A person’s record of paying bills and debts over time is ones

A

credit history

120
Q

is the measure of a person’s creditworthiness

A

consumer’s credit rating

121
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

122
Q

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

A

credit scoring

123
Q

is based on a formula that was originally developed by the Fair Isaac Company in the 1950 (FICO)

A

credit scoring

124
Q

are used to set interest rates on some loans

A

FICO scores

125
Q

How often should consumers review their credit files

A

once a year

126
Q

S and L associations were originally chartered by individual states as mutual societies for two purposes:

A

to take savings deposits

provide home mortgage loans

127
Q

Most credit unions have deposit insurance through the _______.

A

National Credit Union

128
Q

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

A

Store Money
Earn Money
Borrow Money

129
Q

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

A

safety deposit box

130
Q

In this arrangement the real estate property acts as the ________.

A

collateral

131
Q

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

A

Deregulation

132
Q

________ 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

The financial services act of 1999

133
Q

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

A

Technology

134
Q

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

A

personal identification number (PIN)

135
Q

check cards are sometimes called:

A

prepaid cards

U.S. Government (9 decks)

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