Civics Chapter 19
the rate of interest charged to member banks by the Federal Reserve is known as the a. discount rate b. interest rate c. loan rate d. reserve rate
a. discount rate
premium
amount a person pays to an insurance company for protection
what is the Federal Reserve System? what are its purposes?
an organization set up to regulate and manage the US banking system. it is in a place to hopefully aid banks in avoiding failures.
collateral is defined as a. the amount of money needed to be released from jail b. the property used to guarantee that a loan will be repaid c. a business that deals with money and credit d. deducting interest on a loan in advance
b. the property used to guarantee that a loan will be repaid
______ is the legal declaration that a person is unable to pay his or her debts
bankruptcy
________ is a legal declaration that a person cannot repay his or her debts
bankruptcy
the Federal Reserve System is managed by a. US citizens b. the Senate c. a board of governors d. the president
c. a board of governors
__________ allow savers to invest a certain amount of money for a specified period of time during which time the money cannot be withdrawn
certificates of deposit
a ________ is a written and signed order to a bank to pay a sum of money from a checking account to the person or business named on it
check
a written and signed order to a bank to take money from a person's account is a _________
check
________ can be used at thousands of stores to purchase items without using cash
credit cards
similar to charge cards, ________ can be used at a variety of stores
credit cards
________ are the people or businesses to whom money is owed
creditors
the people to whom one owes money are called ________
creditors
a term used for coins and paper money is _________
currency
coins and paper money may also be referred to as _______
currency
_______ is a system of spreading risks over large numbers of people
insurance
people have always used paper money as currency (t/f)
false
regular savings accounts usually require a large minimum balance (t/f)
false
saving and investing are the same (t/f)
false
short term loans can be repaid over long periods of time (t/f)
false
stocks always pay more than if the money were invested in a savings account (t/f)
false
the FDIC insures each depositor's bank account up to $250,000 (t/f)
false
the Federal Reserve System divides the United States into 50 Federal Reserve districts (t/f)
false
the government requires that all citizens have private insurance (t/f)
false
when any bond reaches maturity, the holder earns twice the amount paid (t/f)
false
what steps would a business owner take in order to get a bank loan?
first meet with a loan officer to explain their need for a loan. they would attempt to provide proof of their need and their ability to repay and show how the loan will be beneficial in the long run. once approved, the business owners would purchase whatever they needed and begin repaying the loan.
medicaid
government insurance program that pays money to the states to pay for medical costs of low-income people
medicare
government medical insurance program for Americans over 65
social insurance
government programs that are meant to protect citizens from future hardships
borrowing for a home or vehicle would be examples of ________
long-term credit
most families use ________ to buy cars and other expensive purchases
long-term credit
________ are mutual funds that buy short-term bonds
money market funds
________ contain many different stocks so that the risk is not so great
mutual funds
commercial banks (services offered)
offer checking, savings, and NOW accounts as well as loans and credit cards: help manage retirement funds, property, and investments
savings banks (services offered)
offer home loans and savings accounts
savings and loan associations (services offered)
offer home mortgage loans, checking, savings, and NOW accounts as well as credit cards
credit union (services offered)
offer loans, checking, and savings accounts
what are the three parts of the social security program? how is the program funded?
old age, survivors, and disability insurance, unemployment compensation, and workers compensation; funds are deducted from each worker's pay and redistributed to those receiving social security benefits
most _________ is printed in Washington, DC
paper money
disability income insurance
payments to replace lost wages when a person cannot work due to a partial or total disability
beneficiary
person named in the policy to receive the money when the policyholder dies
the small amount a person pays for insurance is called a(n) ________
premium
a US savings bond does not pay interest until it is cashed in by the bond-holder (t/f)
true
a run on the bank occurs when rumors spread that a bank is shaky (t/f)
true
all banks must receive a state or federal charter to operate (t/f)
true
all currency must be easy to carry and durable (t/f)
true
all of the United States' savings organizations come under state or federal supervision (t/f)
true
banking began when people brought their money to goldsmiths for safekeeping (t/f)
true
bonds and stocks are two of the most popular investments (t/f)
true
credit can be both very helpful and dangerous (t/f)
true
debit cards operate the same way that checks do (t/f)
true
each brokerage house is a member of a stock exchange (t/f)
true
if the Federal Reserve wants to speed economic growth, it puts more money into circulation (t/f)
true
medicaid helps US citizens who are 65 or older pay for hospital care and for some nursing-home care (t/f)
true
one type of social insurance is social security (t/f)
true
savings banks began in the early 1800s to encourage savings by people who could make only very small deposits (t/f)
true
social security provides workers with funds once they retire (t/f)
true
some banks require depositors to keep money in their savings accounts for a period of time (t/f)
true
stock prices depend on expectations of how well a company will perform in the future (t/f)
true
the Federal Reserve System requires that all US banks meet its requirements (t/f)
true
the main purpose of life insurance is to provide the policyholder's family with money in case the policyholder dies (t/f)
true
the money Americans have in savings accounts helps expand the US economy (t/f)
true
two kinds of life insurance are term insurance and whole-life insurance (t/f)
true
when consumers buy goods sooner with the help of credit, the economy grows faster (t/f)
true
you can buy stocks from either a brokerage house or over the internet (t/f)
true
private insurance
voluntary insurance to cover unexpected losses
all people receive the same amount in social security payments (t/f)
false
bankruptcy means that a bank has gone out of business (t/f)
false
by law, banks cannot turn down a person who seeks a loan from them (t/f)
false
certificates of deposit allow the holder to withdraw money at any time (t/f)
false
checks are considered legal tender (t/f)
false
deducting the interest on a loan in advance is known as a deduction (t/f)
false
most coins for general circulation are made in California (t/f)
false
most of the money issued today is coins (t/f)
false
mutual funds can be purchased only at banks (t/f)
false
mints that make coins for general circulation are located in both __________ and ________
Philadelphia; Denver
credit unions (description and specialization)
- description: banks created by people from a single company or organization - specialization: to provide low-interest loans
commercial bank (description and specialization)
- description: banks that offer a full range of services - specialization: to provide all banking services an individual could need
savings banks (description and specialization)
- description: banks that were created to encourage people to save - specialization: to encourage saving
savings and loans associations (description and specialization)
- description: banks that were created to help people purchase homes - specialization: to assist people in saving and buying homes
4 types of insurance
- private insurance - life insurance - social insurance - disability income and health insurance
low-risk methods of saving
- savings account - bonds - certificates of deposit
high-risk methods of saving
- stocks - mutual funds - money market funds
disability income insurance provides payment to workers who have experienced total, not partial, disability (t/f)
false
most families try to save money for unexpected expenses. there are a number of ways to save money. putting a regular amount in ________ can earn interest for the depositor, and banks generally require a small minimum balance on this type of account. when people put a specific amount of money in a financial institution for a certain time period, they are investing in __________. certificates of debt issued by the government, or _________, earn interest from the government when they reach maturity. stocks are another way to save and can be purchased over the internet or from a ________, a person who is employed by a brokerage house. brokerage houses are members of a __________. buying stocks involves more _______ than many other types of savings. many people buy _______ because they are less risky than regular stock purchases. __________ are mutual funds that buy short-term bonds. money can be withdrawn from these funds at any time, but this type of investment is not insured by the ________. saving money is not necessarily investing money. investing money involves earning interest. when you invest your money it is used for expansion in the ________. people want to feel that their money is safe in financial institutions, which is one reason why all banks must receive a ________ from the state or federal government to operate.
a savings account; certificates of deposit; bonds; broker; stock exchange; risk; mutual funds; money-market funds; government; economy; charter
the people employed by brokerage houses are called _______
brokers
the Federal Reserve banks a. handle the banking needs of the federal government b. receive deposits from the secretary of the Treasury c. handle the sale of bonds issued by the government d. all of the above
d. all of the above
a(n) _________ is used like a check to deduct money from a person's checking account
debit card
________ are cards that operate the same way that checks do
debit cards
the wise use of credit by individuals, families, and businesses helps the ________ overall
economy
borrowing with the intention of paying for the item within a few weeks or months is an example of ________
short-term credit
if you purchase an item on credit and can repay the debt in a few weeks or months, you only need ______
short-term credit
government programs that are meant to protect individuals from future hardship are called ________
social insurance
at the _________, millions of shares of stock are bought and sold every working day
stock exchange
insurance
system of spreading risks over large numbers of people
name the agency that the federal government established during the 1930s to regulate the stock exchange and explain its function
the securities exchange commission was created to regulate accuracy of buying and selling stocks
how do insurance companies cover the losses of policyholders when they only collect low premiums?
they do this because not everyone experiences loss, so it should balance out
social security
three-part government insurance program that was set up during the Great Depression
how could a major natural disaster cause a problem for insurance companies?
too many people could be filling expensive claims at once
