Chapter 10 Economics (Mr. Seefeldt)

What is the difference between a commercial bank and a credit union? A.A commercial bank is in business to make a profit, whereas a credit union is a nonprofit service cooperative. B.A commercial bank accepts deposits, makes loans, and provides other financial services, whereas a credit union does not. C.A credit union is in business to make a profit, whereas a commercial bank is a nonprofit service cooperative. D.A credit union accepts deposits, makes loans, and provides other financial services, whereas a commercial bank does not.

A. A commercial bank is in business to make a profit, whereas a credit union is a nonprofit service cooperative.

If I can access funds deposited in a bank by writing a check and without in a bank by writing a check and without having to get bank approval, what type of account do I have? A.Demand deposit account (DDA) B.Traveler's account C.Certificate of deposit D.Time deposit account

A. Demand deposit account (DDA)

What must two people who want to trade with each other have in a barter economy? A.Mutual coincidence of wants B.Pesos C.Federal Reserve notes D.Fiat money

A. Mutual coincidence of wants

What are the four characteristics of money? A.Portability, durability, divisibility, scarcity B.Immobility, weakness, divisibility, abundance C.Exchange, value, storage, scarcity D.Portability, value, divisibility, storage

A. Portability, durability, divisibility, scarcity

Who owns the Federal Reserve System? A.Privately owned commercial banks B.The federal government C.The American people D.The Federal Deposit Insurance Corporation

A. Privately owned commercial banks

Which of the following is an example of a smart banking practice? A.Saving on a regular basis B.Selecting banking services without paying careful consideration to personal needs C.Purchasing items and falling behind on payments D.Accumulating large amounts of credit card debt

A. Saving on a regular basis

To counter bank runs during the Great Depression, the federal government A.declared a bank holiday. B.issued silver certificates. C.went on the gold standard. D.created the Federal Reserve System.

A. declared a bank holiday.

Why did the federal government begin printing greenbacks in 1861? A.To help pay for the Civil War B.To compete with state banks C.To revive the Continental dollar D.To ruin the Confederate economy

A.To help pay for the Civil War

What is a state-chartered bank? A.A nonprofit state-run service that accepts deposits, makes loans, and provides other financial services B.A bank that receives its charter from the state in which it operates C.A bank in which all of the shareholders are residents of the state in which it operates D.A bank in which all of a state's residents are shareholders

B. A bank that receives its charter from the state in which it operates

M1 includes money supply components conforming to money's role as a A.measure of value. B.medium of exchange. C.store of value. D.monetary unit.

B. Medium of exchange

Which of the following is NOT an example of how a bank can make money? A.Making loans to consumers and businesses B.Participating in a bank run C.Applying fees to bank services D.Issuing certificates of deposit

B. Participating in a bank run

What is a certificate of deposit, or CD? A.State-issued legal document required to establish a corporation B.Receipt showing that an investor has made an interest-bearing loan to a financial institution C.Certificate of ownership in a corporation D.Deposit made to a checking account

B. Receipt showing that an investor has made an interest-bearing loan to a financial institution

What is the name of the formula used to compute the amount of a depository institution's required reserves? A.Electronic Funds Transfer B.Reserve requirement C.Certificate of deposit D.Stock exchange

B. Reserve requirement

When money serves as a store of value, it _____ purchasing power. A.loses B.saves C.buys D.sells

B. Saves

What is the main purpose of the FDIC? A.To function as a central bank B.To insure bank deposits C.To control the money supply D.To combat counterfeiting

B. To insure bank deposits

Stocks and shareholders are usually associated with A.certificates of deposit. B.corporations. C.credit cards. D.credit unions.

B. corporations.

Specie was money in the form of A.paper currency. B.silver or gold coins. C.Continental dollars. D.commodities such as corn, hemp, gunpowder, and musket balls.

B. silver or gold coins

Today most of our money is issued by A.individual states. B.the Federal Reserve System. C.the U.S. president. D.Congress.

B. the Federal Reserve System

In 1913, Congress created A.the gold standard. B.the Federal Reserve System. C.silver certificates. D.the Federal Deposit Insurance Corporation.

B. the Federal Reserve System.

When did the United States go on the gold standard? A.1900 B.1878 C.1861 D.1934

C. 1861

What is the difference between a debit card and credit card? A.A debit card allows you to borrow money directly from the bank up to a previously determined limit. A credit card is directly tied to your checking account. B.A credit card allows you to borrow money directly from a bank up to a previously determined limit. A debit card is a type of credit card that has a built-in microprocessor instead of a magnetic security strip. C.A credit card allows you to borrow money directly from the bank up to a previously determined limit. A debit card is electronically tied to your checking account. D.A debit card transfers money immediately from your bank account to the merchant. A credit card is identical to a debit card, but it has a built-in microprocessor with increased safety features.

C. A credit card allows you to borrow money directly from the bank up to a previously determined limit. A debit card is electronically tied to your checking account.

Who issued paper currency in the United States during the first half of the 19th century? A.A central bank B.The national bank C.State banks D.The Federal Reserve

C. State banks

The dollar, or monetary unit and standard unit of currency in the U.S. monetary system, was modeled after A.the French franc. B.the British pound. C.the Spanish peso. D.the Austrian taler.

C. The Spanish peso

What brought more pesos to colonial America? A.Fiat money B.Trade with Native Americans C.Triangular trade D.The American Revolution

C. Triangular trade

By the end of the Revolutionary War, Continental dollars were A.backed by gold. B.printed by the federal government. C.considered worthless. D.all held by banks.

C. considered worthless.

What problem or problems was the Fed supposed to help solve? A.There were many national banks and no centralized system for keeping them strong. B.Banks were vulnerable to failure because of a lack of reserves. C.The nation was operating with several different forms of national currency. D.A, B, and C

D. A, B, and C

How was commodity money different from fiat money? A.Commodity money could be used only to settle debts, while fiat money could be used only to make purchases. B.Fiat money could be used only to settle debts, while commodity money could be used only to make purchases. C.Fiat money had an alternative use as an economic good, while commodity money did not. D.Commodity money had an alternative use as an economic good, while fiat money did not.

D. Commodity money had an alternative use as an economic good, while fiat money did not.

Which of the following is NOT true of a corporation? A.It is a form of a business organization. B.It has the right to buy and sell property. C.It can sue or be sued. D.Its shareholders are responsible for its debt.

D. Its shareholders are responsible for its debt.

Which of the following is an example of a service that is just beginning to gain acceptance in the United States? A.Checking accounts B.Safety deposit boxes C.Electronic Funds Transfers D.Smart cards

D. Smart cards

In 1933, President Roosevelt issued a series of orders that effectively _____ the gold standard to the American people. A.guaranteed B.explained C.promised D.denied

D. denied

central bank

a bank that can lend to other banks in times of need, or a ¨bankers´ bank¨

national bank

a commercial bank chartered by the National Banking System

gold standard

a system in which the basic unit of currency is equivalent to, and can be exchanged for, a specific amount of gold

demand deposit accounts (DDAs)

account whose funds can be removed from a bank or other financial institution by writing a check or using a debit card

state bank

bank that receives its charter from the state in which it operates

state-chartered bank

bank that receives its charter from the state in which it operates

bank holiday

brief period during which all banks or depository institutions are closed to prevent bank runs

M2

broad definition of money supply conforming to money's role as a medium exchange and a store of value; components include M1 plus savings deposits, time deposits, and money market funds

stock

certificate of ownership in a corporation; can be either common or preferred stock

national currency

currency backed by government bonds and issued by commercial banks in the National Banking System

legal tender

currency that must be accepted for payment by decree of government

corporation

form of business organization recognized by law as a separate legal entity with all the rights and responsibilities of an individual, including the right to buy and sell property, enter into legal contracts, and to sue and be sued

reserve requirement

formula used to compute the amount of a depository institution's required reserves

fiat money

money by government decree; has no alternative value or use as a commodity

specie

money in the form of gold or silver coins

Medium of exchange

money or other substance generally accepted as payment for goods and services; one of the three functions of money

commodity money

money that has an alternative use as a commodity; gunpowder, flour, corn, etc.

barter economy

moneyless economy that relies on trade or barter

M1

narrow definition of money supply conforming to money's role as medium of exchange; components include coins, currency, checks, other demand deposits, traveler's checks

credit union

nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services

Store of value

one of the three functions of money allowing people to preserve value for future use

Measure of value

one of the three functions of money that allows it to serve as a common denominator to measure value

Gold Certificates

paper currency backed by gold; issued in 1863 and popular until recalled in 1934

Silver Certificates

paper currency backed by, and redeemable for, silver from 1878 to 1968

Federal Reserve notes

paper currency issued by the Fed that eventually replaced all other types of federal currency

shareholder

person who owns a share or shares of stock in a corporation; same as stockholders

Federal Reserve System (Fed)

privately owned, publicly controlled, central bank of the United States

certificates of deposit/CDs

receipt showing that an investor has made an interest-bearing loan to a financial institution

monetary unit

standard unit of currency in a country's money supply; American dollar, British pound, etc.

bank run

sudden rush by depositors to withdraw all deposited funds, generally in anticipation of bank failure or closure

Federal Deposit Insurance Corporation (FDIC)

the United States government institution that provides deposit insurance on the depositor´s account