1st and 2nd National Bank
The 1st 2 central banks of the United States; Kind of like today's FED; help to fund the government's debt in the first 150 years; opposition to the bank believed it gave the federal government too much power.
Exchanging a good or service for another good or service; Trading baby sitting for math tutoring; If people use this method instead of money transactions taxes cannot be collected; possible to do in very small economies.
Certificate of Deposit
Account that earns higher interest than savings, but penalties for each withdrawal; Safe guaranteed investment in a bank.
characteristic of money
Good money is durable; portable, acceptable, divisible, uniform, and limited in supply (by the government); our dollar possesses all of these; it is the FIAT money.
account that people used to pay bills with a check; called demand deposits because checks can be paid "on demand."
large financial institutions lend money to profit institutions; Suntrust, etc. Major function to loan out money.
when interest gets applied to the principle and the former interest; Credit card companies apply it to your balance increasing debt; or, compounding interest can refer to an investment grows over time.
period of economic decline typically marked by lower GDP, a time when the FED may use loose monetary policy to get the economy going again.
cost of money
Interest;7% interest on a mortgage; important to know the real cost of items you buy with money from a loan
consumer price index is a measure of the inflation rate based on the price of a "market basket" of typical household good and services; compared over time.
money borrowed to pay for a good or service; A loan; Without it our economy would stop because it would be almost impossible to expand.
a number that rates the likelihood of someone paying back a loan; If you want a loan you'd better have a high score or the cost of the loan will be high.
cooperation financial institutions, lend money, non-profit; State employees.
consumer bank cards which draw money directly from the consumer's checking account; check cards; smarter way to spend NO INTEREST
when the government removes some control of the economy; Gramm-Leach-Bliley Act that allows banks more freedom to offer services.
interest the Fed charges banks for loans; If it goes up the cost of money will likely go up; The rate is eventually passed on to the other banks and consumers which can ease or tighten money.
statistics used largely to predict where the country is heading on the busines cycle; exs=GDP, consumer confidence, durable goods orders, unemployment
a gauge of how healthy the economy is; based on indicators such as GDP, unemployment, stock market, and durable goods orders; helps businesses and gov't make decisions that will help the economy grow
Federal Deposit Insurance Corporation - goverment insures up to $250,000 in bank deposits from loss if bank fails.
The central bank of the U.S.; Headed by Benjamin Bernanke; controls the nations money supply monetary (MONEY-TARY) policy
gross domestic product, the value of all FINAL goods and services produced in the country in a period of time; used to measure the health of the economy
GDP per capita
GDP divided by the population; takes population growth out of the picture in order to get an accurate picture of the growth of our economy
Law that set up the Federal Deposit Insurance Corporation; (FDIC); makes consumers feel safe to keep money in banks which keeps that dollar bouncing around from cartoon
government (at all levels) spending; mandatory=have to spend, discretionary=up to Congress to decide; exs of fed expenditures=defense, HHS, Homeland Security
Bonds, notes, and other debt instruments sold by the Fed; The Fed sells and uses as a money-tary tool; used to finance US government borrowings
largest drop in the business cycle in US history; 1930's major unemployment, stock market crash, big increase in government role in the economy.
a rise in price of goods and services; typically about 3% per year; eats at the value of our money; determined by the CPI; fight it with tight money policy
loose / easy money
The supply of money in the market becomes greater; The Fed lowers the discount rate and reserve requirement, or there is economic growth, easier to get a loan; give me the i-pod
medium of exchange
Makes it so people can use money as a form to exchange for goods and service; Functions of money; You have an i-pod that I want, I give you $50 bucks and you give me the i-pod
banks that belong to the Federal Reserve System; most commercial banks; government backed banks
actions carried out by the Federal Reserve in order to regulate the money supply, "money-tary policy," remember 3 tools the FED used to tighten or loosen the money supply
currency in paper or coin form; anything which can be exchanged for goods and services; dollar bills & credit cards; Can MEASURE EXCHANGE & STORE VALUE
open market operations
When the Fed sells U.S. bonds, or buys them back; Used to raise money for the government to borrow; Selling bonds=tightening money supply; Buying bonds=easing money supply.
highest point in the business cylce, typically characterized by higher employment, higher consumer confidence, and stronger business growth.
periods of economic expansion followed by contraction; peaks, contraction, trough, expansion; goverment may employ monetary and/or fiscal policies to smooth out th extremes
GDP expressed in constant prices; takes inflation out of the picture in order to get a more accurate picture of the growth of our economy
ordinarily defined as a prolonged decrease in economic growth as defined by negative growth in GDP; increased unemployment and slow business growth over at least 6 months.
Allows banks to loan a certain percentage of deposits; Currently banks keep 10% of all deposits, for example, a bank that receives a $100 deposit may lend out $90 of that deposit.
account that people use to keep money for later use; usually gives customer interest; rainy day fund; piggy banks
standard of living
a grade of level of comfort of an individual or an entire economy; US=high standard of living (in material value); Haiti=low standard of living
The supply of money is low; The Fed rasies the discount rate and reserve requirement, or there is a credit crunch; makes it harder to get a loan and slows the economy
Tools of the Fed
How the supply of money is controlled; Discount rate, Reserve Requirement, and Selling U.S. Bonds/Securities; If your in the market for a loan you should pay attention to all 3
lowest point in the business cycle, typically characterized by increased unemployment, lower consumer confidence, and slower business growth
Utility of money
How people use money; Measurement, exchange, savings/storage; Get paid on Friday and you can't spend your money until Wednesday at the store