Test 6 Money and Banking Flashcards
1
Q
What is anything that people will accept as payment for goods and services?
A
money
2
Q
Money performs 3 important purposes:
A
medium of exchange
standard of value
store of value
3
Q
Money must serve as a _________________.
A
medium of exchange
4
Q
what is a means through which goods and services can be exchanged?
A
medium of exchange
5
Q
What is the exchange of goods and services without using money?
A
Barter
6
Q
What determines the economic worth in the exchange process?
A
standard of value
7
Q
what is something that holds its value over time?
A
store of value
8
Q
One situation where money does not function well as a store of value is when ________
A
the economy experiences significant inflation
9
Q
What is a sustained rise in the general level of prices?
A
inflation
10
Q
What are the physical properties of money?**
A
- durability
- portability
- divisibility
- uniformity
11
Q
What are the economic properties of money?
A
- stability of value
- scarcity
- acceptability
12
Q
Money draws its value from 3 possible sources:
A
- commodity money
- representative money
- fiat money
13
Q
___________ derives its value from the type of material from which it is composed.
A
commodity money**
14
Q
The most common form of commodity money throughout history has been _________.
A
coins made from precious metals
15
Q
What is paper money backed by something tangible – gold or silver – that gives its value?
A
representative money
16
Q
When were the earliest forms of representative money seen?
A
middle ages
17
Q
Merchants, goldsmiths, and moneylenders began issuing _________ that promised to pay a certain amount of gold or silver.
A
receipts
18
Q
These practices signal the beginning of widespread modern use of __________ ________.
A
paper money
19
Q
What is declared by the government and accepted by citizens to have worth?
A
fiat money
20
Q
The value of the U.S. dollar was linked to _____________________ until ____
A
the value of gold
1971***
21
Q
What is paper money and coins?
A
currency
22
Q
checking accounts are called
A
demand deposits
23
Q
Why are demand deposits called that?
A
funds in checking accounts can be converted to currency “on demand”
24
Q
_____ _________ is savings accounts and time deposits than can be converted into cash relatively easily
A
near money
25
coins contain only a token amount of precious metal that is worth far less than the face value of those coins in ______
fiat money
26
a crucial role of the govt in maintaining the value of fiat money is ___________.
controlling its supply-in other words, maintain its scarcity
27
Most demand deposits are __________ that can be converted into currency simply by writing a check
noninterest-bearing checking accounts
28
traveler's checks are also considered _________
demand deposits
29
what are interest-bearing savings accounts against which drafts may be written
Negotiable order of withdrawal (NOW)
30
What accounts cannot be used directly to make transactions?
near money, such as savings accounts and other interest-bearing accounts
31
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)?
time deposits****
32
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?
money market accounts
33
Economists use various instruments to measure the money supply, but the most often cited are ____ and ____
M1 and M2
34
M1 is the narrowest measure of the money supply, consisting of:***
currency
demand deposits
other checkable deposits
35
the elements of M1 are referred to as _____ ________, which means that they are or can easily become currency.
liquid assets
36
M2 is a broader measure of the money supply, consisting of:
M1 plus various kinds of near money
37
M2 includes:
savings accounts
small-denominational time deposits
money market mutual funds
38
modern banking arose in _____ in the late Middle Ages
italy
39
Italian merchants stored money or valuables for wealthy people and issued ______ that promised to return the property on demand
receipts
40
What was receipting the beginning of?
fractional reserve banking
41
________ is the practice of holding only a fraction of the money deposited in a bank and lending the rest.
fractional reserve banking
42
bank chartered by a state government
state bank
43
was the Secretary of Treasury in 1789
Alexander Hamilton
44
Hamilton was a leading _______ who believed in a strong central government
federalist
45
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
Constitution
46
the First Bank of the US was chartered in
1791
47
Congress finally agreed to charter the Second Bank of the United States in
1816
48
Who was an outspoken critic who mistrusted banks with paper money
President Andrew Jackson
49
during his period, all banks were state banks, each of which issued its own paper currency, called what?
bank notes
50
Why were some of these banks located in remote areas?
to discourage people from redeeming it
51
it was this practice, along with the questionable quality of many bank notes, that resulted in the term _______
wildcat bank
52
the govt’s first solution to this problem was to issue a ________.
a new currency backed by govt bonds
53
these US bank notes were called
greenbacks
54
in 1863, Congress passed the __________, which led to the creation of a system of national banks
National Banking Act
55
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
US Treasury bonds
56
When did the govt officially adopt the gold standard?
1900
57
What is a system that backs the basic monetary unit with a set amount of gold?
gold standard
58
In 1913, Congress passed the ___________________ which established the Federal Reserve System- a true central bank.
federal reserve act
59
The Fed consists of ____ regional banks with a central decision-making board.
12
60
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.
financial services
loans
federal reserve notes
regulates
61
Part of FDR's new deal program was the __________.
Banking Act of 1933
62
the act instituted reforms such as regulating _________ _____ that banks could pay and prohibiting banks from selling stock.
interest rates
63
The ___________________________ provided federal insurance so that if a bank failed, people could no longer lose their money.
FDIC Federal Deposit Insurance Corporation
64
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.
bank
65
The goal of a bank is to earn a _____.
profit
66
All financial institutions receive a _________ from the government, either state or federal.
charter
67
_________ are the oldest form of banking and are the financial institutions most commonly thought of as banks.
privately owned commercial banks
68
________ _______ were initially established to provide loans to businesses.
commercial banks
69
________ _______ provide basic banking services; investment banks bought and sold assets through the financial markets
commercial banks
70
Commercial banks provide a wide range of services including:
```
checking
savings
loans
investment assistance
credit cards
```
71
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
deregulation
72
What insures all commercial banks based in the US?
FDIC
73
All national commercial banks belong to the ________ ________ _________.
federal reserve system
74
____________ began in the US in the 1830s.
Savings and loan associations
75
in 1933 the federal government began
charting S&Ls
76
in 1934 the government established
the Federal Savings and Loan insurance corporation
77
In 1989 following the S&L crisis, the ______ was abolished and the ____ began insuring S&Ls
FSLIC
| FDIC
78
Many savings institutions raise financing through the sale of ______; just as commercial banks do
stock
79
The idea for ______ began in Europe in the mid 1800s
credit unions
80
The first credit union in the US began in 1909 as
state-chartered institutions
81
_______ created a system of federally chartered credit unions
Federal Credit Union Act of 1934
82
Most credit unions have deposit insurance through the _______.
National Credit Union
83
Most credit unions have deposit insurance through the ______________ an organization similar to the FDIC
National Credit Union Association (NCUA)
84
The major difference between credit unions and other financial institutions is that credit unions have
membership requirements
85
Banks are places where
money can be bought and sold
86
One common loan a bank makes is a ________.
mortgage
87
The lender and the borrower agree on a _________ for the loan (up to 30 yrs) and an ________ to be paid to the lender
time period
| interest rate
88
In this arrangement the real estate properly acts as the ________.
collateral
89
So if the borrower ________ the lender takes control of the property
defaults(stops making payments)
90
_______ are issued by banks to users who are borrowers
Credit cards
91
If you don't pay it back within a month, you'll owe the bank
extra in interest
92
_______ tightly regulated the amount of interest that banks could pay on deposits and could charge on loans
The banking act of 1933
93
in the 1980s and 1990s ended these restrictions and brought major changes to the banking industry
Deregulation
94
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
The financial services act of 1999
95
This change allowed banks to sell:
stocks, bonds, and insurance
96
_________ balanced, in part because of lax lending money
Real estate prices
97
The banks and other financial companies would bundle the ________ and sell them as mortgage-backed securities, an investment similar to a bond
mortgages
98
_______ is a contract a corporation issues that promises to repay borrowed money, plus interest on a fixed schedule
A bond
99
________ encouraged banks to generate more mortgages by lowering their lending standards further, which drove house prices even higher
the easy profits
100
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
automated teller machines(ATM)
101
Other innovations include _______ that can be used like an ATM card or check
debit cards
102
represents money that the holder has on deposit with the issuer
A stored-value card
103
_______ are the oldest and most familiar of the developments of electronic banking
ATMs
104
In order to use one you must have a _________ for you ATM/Debit card
personal identification number (PIN)
105
Like ATM cards, _________ can be used to withdraw cash and make other transactions at ATM machines
debit cards
106
Debit cards are sometimes called:
check cards
107
__________ allows customers who have set up accounts with a bank to perform practically every transaction without setting foot in a bank
Electronic banking
108
is a crime in which one person fraudulently uses another’s identity to obtain credit or to access financial accounts
identity theft
109
can be accomplished easily and there is little risk of getting caught
identity theft
110
What does an identity thief need?
SSN
111
What is the best way to avoid identity theft?
avoid letting ppl see your financial info unless they actually need to
112
Shred all bank statements, bills, or other documents that include
account or Social Security numbers
113
If you discover your identity has been stolen follow these steps:
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
is the measure of your dependability to repay a loan
creditworthiness
115
is a measure of your financial responsibility
character
116
is a measure of a consumer’s ability to repay a debt on time
capacity
117
is a measure of the value of things a consumer owns that could be sold or cashed in to repay a loan
capital
118
examples of capital
Stocks, Bonds, buildings, land
119
A person’s record of paying bills and debts over time is ones
credit history
120
is the measure of a person’s creditworthiness
consumer's credit rating
121
is based off making payments on time, current debt, other credit history, recent applications for credit, and type of credit used
credit rating
122
is a system hat assigns a number, or score, to each consumer indicating whether this person is a good or bad credit risk
credit scoring
123
is based on a formula that was originally developed by the Fair Isaac Company in the 1950 (FICO)
credit scoring
124
are used to set interest rates on some loans
FICO scores
125
How often should consumers review their credit files
once a year
126
S and L associations were originally chartered by individual states as mutual societies for two purposes:
to take savings deposits
| provide home mortgage loans
127
Most credit unions have deposit insurance through the _______.
National Credit Union
128
By using these services, customers are able to do three things:
Store Money
Earn Money
Borrow Money
129
You can store important papers and valuables through the use of a ___________.
safety deposit box
130
In this arrangement the real estate property acts as the ________.
collateral
131
______ in the 1980s and 1990s ended these restrictions and brought major changes to the banking industry
Deregulation
132
________ 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
The financial services act of 1999
133
has changed the way consumers use banks, producing a system generally referred to as electronic banking
Technology
134
In order to use one you must have a _________ for your ATM/Debit card
personal identification number (PIN)
135
check cards are sometimes called:
prepaid cards
