Chapter 10

national bank

a bank chartered by the federal government

central bank

a bank that can lend to other banks in time of need

credit card

a card entitling its owner to buy goods and services based on the owner's promise to pay for those goods and services

debit card

a card used to withdraw money from a bank account

gold standard

a monetary system in which paper money and coins had the value of certain amounts of gold

specie

coined money, usually gold or silver, used to back paper money

currency

coins and paper bills used as money

default

failing to pay back a loan

Identify different types of financial institutions.

1. Commercial Banks 2. Savings and Loan Associations 3. Savings Banks 4. Credit Unions 5. Finance Companies

List the six characteristics of money

1. Durability 2. Portability 3. Divisibility 4. Uniformity 5. Limited Supply 6. Acceptability

Describe the three uses of money

1. Medium of exchange - anything that is used to determine value during the exchange of goods 2. Unit of account - a means for comparing the values of goods and services 3. Store of value - something that keeps its value if it is stored rather than spent

Describe the shifts between centralized and decentralized banking before the Civil War.

Banks would charge a fee in order to keep money safe. However, they were not very safe.

Analyze the sources of money's value.

Money is only valuable as long as its supply is limited.

Describe the developments in banking in the early 1990s.

The Federal Reserve System was introduced. Banking was going well until Great Depression that occurred in 1929.

Explain how the money supply in the United States is measured.

The money in the U.S. is measured through M1 and M2 (which contains everything in M1 and more).

demand deposit

money in a checking account that can be paid out "on demand" or at any time

fiat money

objects that have value because a government has decreed that they are an acceptable means to pay debts

representative money

objects that have value because the holder can exchange them for something else

commodity money

objects that have value in and of themselves and that are also used as money

liquidity

the ability to be used as, or directly converted into, cash