Economics Chapter 8

Debit card

Allows access to money in your bank account.

Fractional reserve lending

Set amount or fraction of deposits must be kept in the bank.

Demand Deposit

Checking or savings account.

Currency

Coins and bills.

Unit of account (Standard of value)

Compare the value of products and services. Everything costs a certain amount.

What 3 things make up the money supply?

Currency and coins, checking accounts, and traveler's checks.

Double Coincidence of wants

Finding two people whose disposable posessions suit the other person's wants.

Who were the early bankers? Why were they chosen?

Goldsmiths because money used to be made out of real gold and they made the gold.

What gives money its value?

It is generally accepted as a mean of payment.

Money

Mean or means of payment.

Medium of exchange

Means of exchange.

What are the functions of money?

Medium of exchange, standard of value, and store of value.

How did money emerge from the barter system?

Money evolved from trading, it is a mean of payment, and it is divisable.

Near-money

Money is not used directly to buy things.

Store of value

Money maintains purchasing power over time but the price is increasing gradually.

Savings account

Money not used directly to purchase items. Near-money.

Is a double coincidence of wants more likely or less likely to occur in a barter economy and why?

More likely because you have to find someone to trade with. People are less likely to specialize as extensively as they would in a monetary economy

Is a savings account money, why or why not?

No because you cannot walk into a store and buy products or services with it.

Are credit cards money, why or why not?

No. They are loans that you use to buy goods and services. You pay back the loan later.

Federal reserve note

Promise to exchange banknote for the deposit "on demand."

What are warehouse receipts and how are they used?

Receipt that says what you are storing and what its value is.

Why did people need banks?

To keep their money safely stored and protected.

Money supply

Total amount of money in circulation in a country.

Barter economy

Trading with others or other companies.

Face Value

Value printed or depicted on a coin, banknote, postage stamp, ticket, and more. Especially when less than the actual or intrinsic value.

How do you use a debit card?

You access the money that is in your bank account.

Understand an "Asset Allocation Chart". Describe what it should look like for someone who is young versus someone who is older.

Young- Invest highly in stocks, medium in bonds, and low in savings. Older- Invest medium in stocks, medium in bonds, and highly in savings.