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Civics - Chapter 24 (Money and Banking)
Terms in this set (37)
1. serves as a medium of exchange
2. serves as a store of value
3. serves as a measure of value
Name the 3 functions of money
we can trade money for goods and services
"Money serves as a medium of exchange" means that
we can hold our wealth in the form of money until we are ready to spend it
"Money serves as a store of value" means that
it serves as a measuring stick to show how good of a value a service or item has
"Money serves as a measure of value" means that
salt, animal hides, gems, and tobacco
Name a few forms of money historically.
coins and currency
What are the most familiar types of money today?
__ are metallic forms of money such as pennies, nickles, and dimes
__ includes both coins and paper money
we know for sure that someone else will accept its value too
Why do we value and accept money?
The bank lends it to other people and business that need money. The people repay the bank with interest, so the bank makes money and so do you!
When you put money in a bank, what does it do with your money?
commercial bank. (This is where they have checking accounts and savings accounts.)
When people have extra money, they usually put it in a __
savings and loan associations (S&L's)
__ are financial institutions that traditionally loaned money to people buying homes. Today, these do a lot of the same jobs that commercial banks do.
__ are sponsored by large businesses, labor unions, or government institutions. They are only open to members of the group that sponsors them. They give workers a "bank" that has low costs
Federal Reserve System (Fed)
What is the central bank of the United States?
a banker's bank; When banks need to borrow money, they borrow from the Fed
What is the Federal Reserve System?
member banks (they can own stock in the Fed and own dividends from it)
Who owns the Feds?
Board of Governors
Who makes economic decisions for the Federal Reserve System (Fed)?
The President appoints and the Senate ratifies the 7 members of this board
Tell about the Board of Governors
Federal Open Market Committee (FOMC)
The __ makes decisions that affect the economy as a whole by manipulating the money supply
What does the Fed use to keep informed of the developments in the economy?
1. it holds the government's money
2. it sells US government bonds and treasury bills
3. it issues the nation's currency - paper money and coins
How does the Fed act as the government's bank?
__ involves controlling the supply of money and the cost of borrowing money (credit) according to the needs of the economy. The Fed is in charge of this
1. raise or lower the discount rate
2. raise or lower reserve requirement
3. change the money supply through open market operations
Name three tools used by the Fed to manipulate the money supply.
raise - to slow down the economy by making it cost more to get a loan
lower - to stimulate the economy by making it easier to borrow money
Why does the Fed raise or lower discount rates?
Banks must keep a % of their money in the Federal Reserve Banks. If the Fed raises the requirement, then the smaller banks have less money to lend to people. If the Fed lowers the requirement, then the smaller banks have more money to lend to people
What is raising or lower the reserve requirement?
the sale or purchase of US government bonds and Treasury bills
What are open market operations?
Banks attract customers who will make deposits. So they offer __ which allow customers to write checks or use debit cards.
People use the money in checking accounts to pay __. They usually do not leave a bunch of money hanging around in a checking account
If people have money they can leave untouched for a while, they will put it in a __ which will earn them some interest on the money they deposit
certificates of deposit (CDs)
Banks offer __ in which a person can loan money to the bank. The bank plays the person interest for loaning the money. When the agreed time period ends, the person can regain control of his money. If you try to get your money before the time is up, you would have to pay penalties.
CDs because you are willing to lose control of your money for a while
Which usually pays higher interest - savings accounts or CDs?
The Bank of the United States
__ was the first central bank started by George Washington
The National Banking Act
__ was passed in 1863 and it created a system of banking known as dual banking. Banks could have either a state or federal charter
The ___ of the 1930s caused several banks to collapse
Federal Deposit Insurance Corporation (FDIC)
__ restored people's confidence in banks by insuring them in case the bank failed
__ cards allow you to buy things with money that you may or may not have earned yet. If you don't pay off your monthly bill, you will be charged a lot of interest
__ cards transfer money from your banking account into the account of the seller. "buy now, pay now" is the principle of these cards. If your account does not have enough money to afford an item, the sale will not be allowed
What are two rights in the Dec. of Independence?
How may states challenge the federal government?
What stops one branch of the gov't from becoming too powerful
Which two groups of people, discussed in this lesson, contributed to the development of folk music in the United States?
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