Chapter 8, Economic Test
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
