Understanding Business Chapter 20

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Terms in this set (...)

Money
Anything that people generally accept as payment for goods and services
Barter
The direct trading of goods or services for other goods and services
Money Supply
The amount of money the Federal Reserve Bank makes available for people to buy goods and services
M-1
Money that can be accessed quickly and easily (coins and paper money, checks, travelers checks, etc.)
M-2
Money included in M-1 plus money that may take a little more time to obtain (saving accounts, money market accounts, mutual funds, certificates of deposit, etc.)
M-3
M-2 plus big deposits like institutional money market funds
Reserve Requirement
A percentage of commercial banks checking and savings accounts they must be physically kept in the bank
Open-Market Operations
The buying and selling of U.S. government bonds by the Fed with the goal of regulating the money supply
Discount Rate
The interest rate that the Fed charges for loans to member banks
Commercial Bank
A profit seeking organization that receives deposits from individuals and corporations in the form of checking and savings accounts and then uses some of these funds to make loans
Demand Deposit
The technical name for a checking account; the money in a demand deposit can be withdrawn anytime on demand from the depositor
Time Deposit
The technical name for a savings account; the bank can require prior notice before the owner withdraws money from a time deposit
Certificate of Deposit (CD)
A time deposit (savings) account that earns interest to be delivered a the end of the certificate's maturity date
Saving and Loan Association (S&L)
A financial institution that accepts both savings and checking deposits and provides home mortgage loans
Credit Unions
Nonprofit, member owned financial cooperatives that offer the full variety of banking services to their members
Nonbanks
Financial organizations that accept no deposits but offer many of the services provided by regular banks (pension funds, insurance companies, commercial finance companies, consumer finance companies, and brokerage houses)
Pension Funds
Amounts of money put aside by corporations, nonprofit organizations, or unions to cover part of the financial needs of members when they retire
Federal Deposit Insurance Corporation (FDIC)
An independent agency of the U.S. government that insures bank deposits
Savings Association Insurance Fund (SAIF)
The part of the FDIC that insures holders of accounts in savings and loan associations
Electronic Funds Transfer (EFT) System
A computerized system that electronically performs financial transactions such as making purchases, paying bills, and receiving paychecks
Debit Card
An electronic funds transfer tool that serves the same function as checks: it withdraws funds from a checking account
Smart Card
An electronic funds transfer tool that is a combination credit card, debit card, phone card, driver's license card, and more
Letter of Credit
A promise by the bank to pay the seller a given amount if certain conditions are met
Banker's Acceptance
A promise that the bank will pay some specified amount at a particular time
World Bank
The bank primarily responsible for financing economic development; also known as the International Bank for Reconstruction and Development
International Monetary Fund (IMF)
Organization that assists the smooth flow of money among nations