Chapter 8, Economic Test

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What are the six characteristics of money?

Divisibility, Acceptability, Uniformity, Durability, Scarcity, and Portability

Describe this characteristic of money- Uniformity

Each piece of money should be the same.

What does Medium of Exchange mean?

Enable us to exchange with money. Everything happens with money.

What is the central bank of the US?

The Federal Reserve System

Who are the Federal Reserves costumers?

The Nations Banks

Define- Bank

a business whose main purpose is to receive deposits and make loans

Define- Debit Card

a card authorizing the user to access his or her own funds on deposit in a bank account; can be used to buy goods and services or to withdraw money directly from an account

Define- Credit Card

a card authorizing the user to buy goods and services with funds borrowed from the bank, store, or other business that issued the card

Define- Interest

a periodic payment for the use of borrowed funds; paid on a loan

Define- Budget

a plan for spending and saving money

Define- Check

a signed form instructing a bank to pay a specified amount to the person or business named on it

Define- Loan

a transaction in which a lender gives money to a borrower, who agrees to repay the money at some point in the future

Define- Commodity Money

any good used as a medium of exchange; examples include gold, silver, and salt

Define- Assets

anything owned to which a market value can be assigned

Define- Principal

the amount of money borrowed, or the amount of money still owed on a loan, apart from public goods

Define- Liquidity

the ease with which assets can be converted into cash

What does the Standard of Value mean?

Allows us to measure and compare the value of goods.

What does financial intermediary mean?

An institution that brings together buyers and sellers in financial market.

What are some examples of historical types of money?

Bead, cattle, shells, salt, silver, gold, furs, tobacco

What is a commercial loan?

Businesses take out the loan, to help build your business

What is the money today?

Cash and coins, credit cards and debit cards, and the banks keep the money.

Rank the three types of deposits from highest return to lowest return.

Highest- Time deposits Saving deposit Lowest- Checkable deposit

What is a consumer loans?

Individual borrower take out the loan to buy something.

How does the Federal Reserve control the nation's money supply?

It sets reserve requirements, the minimums fraction of deposits that banks must keep in their vaults. Also how much money gets printed.

The degree to which assets in an account can be converted to cash is called ....

Liquidity

What is a mortgage loan?

Loan used to buy restate.

Describe this characteristic of money- Scarcity

Money needs to be scarce enough to be valued by the buyers and the sellers.

What does Store of value mean?

Money value never gets old or spoiled, never will lose its value.

Rank the three types of deposits from most liquid to least liquid.

Most- Checkable Deposits Saving deposits Least- Time deposits

Describe this characteristic of money- Portability

Must be convenient to carry around.

Describe this characteristic of money- Durability

Must be durable so it can stand from going from person to person.

Describe this characteristic of money- Divisibility

Must be easy to divide up. Ex- 20 dollars to 10 dollars

Describe this characteristic of money- Acceptability

Seller must be willing to accept what you offer.

What is the main function of a bank?

Serves as a financial intermediary?

What are the functions of money?

Store of value, Medium of Exchange, and Standard of Value

How to banks execute their main function?

They receive deposits from savers and make loans to borrowers.

What is the Federal Reserves goal?

To keep the entire banking system stable and healthy.

Define- Saving

setting aside a portion of income for use in the future


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