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Economics C10: Money & Banking

Terms

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What is Money?
Anything that serves as a medium of exhange, a unit of account, and a store of value
What is a Medium of Exchange?
Anything that is used to determine value during the exchange of goods & services
What is Barter?
The direct exchange of one set of goods or services for another used in traditional unspecialized economies.
What is a Unit of Account?
A means for comparing the values of goods & services.
What is a Store of Value?
Money keeps its value if you decide to hold on to-or store- it instead of spending it.
What is Currency?
The coins and paper bills used as money.
What is Commodity Money?
Objects that have value in and out of themselves and that are also used as money.
What is Representative Money?
Makes use of objects that have value because the holer can exchange them for something else of value.
What is Fiat Money?
Called "Legal Tender", this money has value because the government ha ordered that it is and acceptable means to pay debts.
What is a Bank?
An institution for receiving,
keeping, and lending money-near your home.
What is the National Bank?
A bank chartered/licensed by National Gov. which could issue a single currency for the entire nation, manage the federal government's funds, and monitor other banks throughout the country
What is a Bank Run?
Widespread panics in which great numbers of people tried to redeem their paper money at once causing banks to fail & public confidence to go down.
What are Greenbacks?
The common name for currency produced in 1861 by the U.S. Treasury called "demand notes"
What is the Gold Standard?
A monetary system in which paper money and coins are equal to the value of a certain amount of gold.
What is the Federal Reserve System (Fed)?
The nation's first true "central bank" which could lend to other banks in time of need.
What are Member Banks?
Banks belonging to the Federal Reserve System which stored some of their cash reserves at the district Fed.
What are Federal Reserve Notes?
The national currency of U.S.A. increased/decreased by the Federal Reserve for circulation to meet business needs.
What was the Great Depression?
A severe economic decline that began in 1929 and lasted more than a decade.
What is the Federal Deposit Insurance Corporation (FDIC)?
Congress passed this act in 1933 to insure customer deposits if a bank fails.
What is the Money Supply?
All the money available to the United States economy.
What is Liquidity?
The ability to be used as, or directly converted into, cash referred to by economists as M1.
What are Demand Deposits?
Funds in checking accounts as they are paid "on demand"
or at any time.
What is Fractional Reserve Banking?
A banking system that keeps only a fraction of funds on hand and lends out the remainder.
What is a Default?
When a borrower fails to pay back a loan causing the lender ( bank ) to lose money.
What is Interest?
The price paid for the use of borrowed money.
What is Principal?
The amount borrowed from a lender.
What is a Debit Card?
A card used to withdraw money from an ATM/automated teller machine or to pay a store for a good/service.
What is a Creditor?
A person or institution to whom money is owed.
What is a Central Bank?
A bank that can lend to other banks in times of need.

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