Unit 8 Banking

Question 1

Commercial banks

Answer 1

Are for profit sales

Question 2

Credit union

Answer 2

Are owned by members

Question 3

What services do banks provide

Answer 3

Store money
Borrow money
Earn money

Question 4

How safe are banks?

Answer 4

federal reserve act (1913)
Created by federal reserve

Federal deposit insurance corporations (FDIC)
Insures costumers money if bank fails

Question 5

Primary goal of a bank

Answer 5

Earn a profit

Question 6

Fractional reserve banking system

Answer 6

Fed requires banks to keep a % of deposits in vaults “in reserve”
Usually 10%
By making loans banks “create money” Provide money to others to spend in the economy

Question 7

The fed is divided into how many groups

Answer 7

12

Question 8

Janet yellen

Answer 8

Chair person of federal reserve board of governors

Question 9

Duties of the Feds

Answer 9

Regulate and supervise banks
Provide banking services for federal govt and other banks
Check clearing
Currently- replaces worn out money
To keep the us economy stable and healthy

Question 10

Monetary policy

Answer 10

Fed controls growth of money supple influences interest rates

Question 11

Expansions policy easy money

Answer 11

Feds allow money supply to grow and interest rates to fail

Question 12

Contraction art policy tight money

Answer 12

Fed restricts growth of money supple and interest rates rise

Question 13

Too much money in an economy causes

Answer 13

Inflation

Question 14

Too little money in an economy causes

Answer 14

Recession

Question 15

Bank

Answer 15

Financial institution that takes in deposits and makes loans

Question 16

Tools of monetary policy

Answer 16

Open market operations
Reserve requirement
Discount rate

Question 17

Open market operations

Answer 17

Fed buys or sells govt securities (bonds) to ads or subtract from a banks reserves

Easy money- fed buys securities
Tight money- fed sells securities

Question 18

Reserve requirement

Answer 18

Fed requires banks to keep a %
Can’t be used for loans

Easy money- fed lowers reserve requirements
Tight money -fed raises reserve requirement

Question 19

Discount rate

Answer 19

Interest rate the fed charges banks to borrow money

Easy money - fed lowers rates
Tight money- fed raises rates

Question 20

What is GDP stand for

Answer 20

Gross domestic product

Question 21

What is GDP

Answer 21

The market value of all final goods and services produced within a national borders in a given time period

Question 22

When is it calculated and how many times is it checked a year

Answer 22

Yearly

Checked 4 times

Question 23

What three requirements must be met to be part of GDP

Answer 23

Must be a final good
Must be a new good
Must be produced within the us

Question 24

What is not counted in the GDP

Answer 24

No market activities (volunteers)

Underground economy

Question 25

Nominal GDP

Answer 25

Uses current prices

Does not take into account price changes

Question 26

Real GDP

Answer 26

Uses constant prices
Takes into account price changes
More account measure of economic performance

Question 27

What is the business cycle

Answer 27

Series of growing and shrinking periods of economic activity

Question 28

4 parts of a business cycle

Answer 28

Expansion - economic growth
Peak- highest point prices rise
Recession - GDP declines and procedures cut back
Trough- end of contraction everything stops declining

Question 29

Fiat money

Answer 29

Currency declared to have value by the govt

Question 30

M1

Answer 30

All the currency and check deposits

Question 31

M2

Answer 31

M1 + savings accounts

Question 32

Properties of money

Answer 32

Divisible acceptable portable scarce durable stable

Question 33

Explain create money

Answer 33

Fed requires banks to keep a %
Banks make loans with the reserve
By making loans banks create money

Question 34

Who overseas the federal reserve system

Answer 34

Board of governors