Module 4

A nationwide panic leads Americans to pull their money from banks (run on the banks), until J.P. Morgan offers to back the banks with his own money.

1907

Primarily offers mortgages and other loans

S&Ls

borrowing

a place to borrow money for specific purposes, such as college tuition or buying a car.

investing

a place to earn money over the long term by allowing other companies to use your money.

What is a bank note most like?

a promise?

On which continent did paper money first appear?

asia

Insured by FDIC

bank and S&L

Which of these was used as an early form of currency?

cows

Insured by NCUA

credit union

Which institution is owned by its account holders?

credit union

Which of these was a major factor in the economic instability of the 1970s?

crisis of confidence in financial system

Every deposit you make to the bank should be accompanied by a _______.

deposit slip

Because your cash reserves are low, you direct your workers in the bank's basement to print more $100 bills.

false

Deposits at a credit union are insured by the FDIC.

false

It is cheaper to use a check-cashing store than it is to cash a check at a bank.

false

Payday loan stores pay customers extra for borrowing money over the short term.

false

Securities firms sell insurance policies and insure homeowners against risk.

false

__________ pair people who have money to invest with businesses that need money to grow.

security firms

A withdrawal slip

shows how much money you want to take out of your account

Banks keep your _______ on file to prove your identity.

signature card

You use an ATM at the mall to get some money for the movies.

spending

Which of these were characteristics of the American economy of the 1950s?

steady growth and increased production

In what scenario do insurance companies make a profit?

when the fees paid by consumers are greater than insurance payouts

One result of placing your money in a savings account is that your money

will earn interest

With a passbook savings account,

you can access your money whenever you want it

With a money market account

you can earn higher interest rates

With a money market account, _______.

you have a limited number of transactions each month

For how much are accounts insured by the NCUA?

$250,000

The Industrial Revolution leads to an increased use of currency.

1700s

The First Bank of the United States is established.

1791

The Second Bank of the United States is established.

1816

The United States takes on debt to prepare for World War I.

1914

A huge stock market crash marks the beginning of the Great Depression.

1929

The United States is in the midst of a period of steady growth.

1950

The American economy experiences high inflation rates.

1970

Stocks rise, business grows, and Americans have easier access to credit

1995

Dot-com era.

1995-2000

in what year was the euro introduced

1999

Mortgage foreclosures cause many banks to fail (in addition to other bad assets on their insolvent books).

2007

Rule of 72

72 ÷ (interest rate) = (number of years to double your money)

gold standard

A monetary system in which paper money and coins are equal to the value of a certain amount of gold

Electronic banking

A service provided by financial institutions that allows customers to manage their banking transactions through computerized network services.

interest

A sum paid or charged for the use of money or for borrowing money

National Credit Union Administration (NCUA)

All accounts are insured for up to $250,000 per depositor, per bank

Which countries have adopted the euro?

Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain

ATM stands for

Automated Teller Machine

fiat money

Fiat money has no value in itself—instead, it has value because a government has backed it and has declared it to have a specific value.

What characteristic is common to money throughout history?

It has been relatively easy to trade, transport, save, and invest.

What is one reason for the creation of the euro?

More opportunities for business and markets

Deposits at a credit union are insured by the __________.

NCUA.

What is one disadvantage of getting money from a payday loan store?

Payday loan stores charge much higher fees than banks.

exchange rate

The measure of how much one currency is worth in relation to another.

What risk do investors take on when they invest or loan money to new businesses?

They will fail in their business

invest

To commit money to gain a profit or earn interest

financial institutions

a bank, trust company, insurance company, credit union, building and loan association, savings and loan association, place for deposit of funds or medium of savings or collective investments.

Saving

a safe place to save money and to make money by earning interest.

Offers check cashing and checking accounts

all of the above

spending

an easy way to spend money, through services like ATM cards, automatic payments, and checking accounts.

Which term describes getting a sum of money for a specific purpose that is repaid over time?

borrowing

A _______ is the back part of the checkbook where you keep track of your spending.

check register

Consumers who cash checks at __________ often have to pay a high fee.

check-cashing stores

Which financial institutions issue commercial credit cards?

commercial banks

__________ issue credit cards

commercial banks

What is the term that describes a form of money that has intrinsic value?

commodity

On which side of a euro coin will you find its denomination?

common side

Owned by account holders

credit unions

One way to get quicker access to money from your paycheck is through

direct deposit

When an employer transfers your pay to your bank account, it is called _______.

direct deposit

The interest rate between British pounds and U.S. dollars favors American money because England has been involved in World War I.

false

You must reject most loan applications because consumer credit is still tight because of the Enron scandal.

false

Payday loans can be expensive because of the high __________

financial charges

Which of these served as the standard for currency through much of the 19th and 20th centuries?

gold

__________ take on consumer risk and pay out money in the event of disasters related to events including illness, death, and natural disasters.

insurance companies

Federal Deposit Insurance Corporation (FDIC)

insures banks and savings and loan companies. Deposits made at credit unions are insured

Lenders earn money when borrowers pay back the loan with __________

intrest

Which term describes the extra fee paid in return for borrowing a sum of money—excluding the loan origination fee?

intrest

When someone gives money to a business to help it grow, it is called __________

investing

Which activity do securities firms focus most of their attention?

investing

You and a friend chip in on a sound system so you can take some DJ jobs at parties around town.

investing

Principal

is the amount of money Isabella deposits

__________ provide loans to individuals and businesses.

lending institutions

When your money can be easily accessed and used for many purposes, it is _______.

liquid

commodity money

money that takes the form of a commodity with intrinsic value

What is the primary role of lending institutions?

pairing investors with business owners

You keep your babysitting money in a jar in your room to buy a new pair of jeans.

saving

A/An _______ earns interest over time.

savings account

Which institutions are insured by the FDIC?

savings and loan companies, and banks

What was the inspiration for the euro symbol?

the greek letter espilon

Whose name do you write on the top line of a check?

the person receiving the funds

What characteristic did early forms of money share?

they were relatively easy to transport

What made Lydian coins different from Chinese coins?

they were stamped with information

What was one result of increased mortgage foreclosures after 2007?

tighter bank restrictions

Which of these was one of the reasons for establishing the First Bank of the United States?

to create a single currency for the United States

What was the purpose of establishing the Federal Reserve Bank?

to make funds available to banks when cash reserves were low

The deposits and withdrawals that you make each month with your account are called _______.

transactions

A credit union is a financial institution that is owned by the account holders.

true

A personal account at a savings and loan is insured for up to $250,000.

true

The FDIC insures personal accounts at savings and loans institutions.

true

intrinsic value

value independent of any benefit to humans

savings and loan crisis

was the failure of about 747 out of the 3,234 banks in the United States. 1980s-90s