Economics Chapter 10 Money And The Financial Market

Money
Anything that is commonly used and generally accepted in payment for goods and services; a medium of exchange.
Legal Tender
A form of money that a government declares must be accepted by creditors if it is tendered (offered) by a debtor.
Barter
The exchange of one person’s goods or services for another’s goods or services.
Double Coincidence Of Wants
Both parties involved in a trade of goods or services wanting what the other has to trade.
Commodity Money
A commonly used or valued good that serves as a medium of exchange.
Full-Bodied Coin
A coin that contains an amount of gold or silver of equal worth to its face value
Token Coin
A coin that contains a quantity of metal worth less than its face value.
Representative Money
Money that represents a commodity held in store.
Fiat Money
Money that is not backed by anything of value but serves as money because of governmental decree.
M-1
A measure of the nation’s money supply that is available for immediate spending and includes currency, traveler’s checks, and checking accounts.
M-2
A measure of the nation’s money supply that includes all M-1 money plus all money that is available to spend after a short delay, such as savings accounts, small-time deposits, and other short-notice deposits.
Fractional Reserve Banking
A system in which a banker lends out more paper money than he can back.
Financial Market
The vast collection of financial institutions that receive deposits of excess funds from households and that lend to business firms; includes commercial banks, savings and loan associations, credit union, insurance companies, finance companies, and stockbrokerage firms.
Commercial Bank
A financial institution that accepts deposits and makes commercial and private loans.
Charter
An authorization for a bank to exist, issued either by the federal government or by state government.
Savings And Loan Associations (S&L’S)
A financial institution designed to collect savings and use that capital to make loans.
Mutual Savings Banks
A financial institution that exists almost exclusively in the northeastern United States and resembles a savings and loan except for some technicalities concerning its organization.
Credit Union
A cooperative institution that pools the savings of its members and makes consumer loans available to them.
Latin for Fiat is?
“Let it be done”
Legal Tender
What term implies that a merchant must accept in the payment of debts whatever the government declares to be money?
1. Means of payment
2. Measure of value
3. Means of storing purchasing power
What 3 functions does money serve?
1. Convenience
2. Portability
3. Divisibility
4. Durability
5. Stability
What are the 5 characteristics that an effective monetary system should possess?
1. Commodity
2. Representative
3. Fiat
What are the 3 kinds of money that can circulate in an economy?
M1: Paper, coin, traveler’s checks, and checking accounts.
M2: M1, and a variety of savings accounts.
Name 2 measures of the money supply discussed in the book.
1. In writing
2. Signed by the maker
3. Payable to the bearer or to the order of a specific person.
4. Ordering the bank to pay a specified sum of money.
5. Bearing a date no older than six months.
The 5 ways to make a check are?
the legislation left the nation with both state and federally chartered institutions.
What does it mean to say that the United States has a dual banking system?
1. Accepting deposits
2. Extending Loans
3. Providig Miscellaneous services
What are the functions of commercial banks?
Credit Unions
Which type of thrift usually originates with a group of people who have something in common (usually employment).
Pension funds
Give an example of a contractual saving institution?
Pro: thieves have a hard time stealing it
Con: its not portable and it inconvenient
Name an advantage and disadvantage of the money used on the Yap Islands.
Because it better retains its face value.
How does money act as a store of purchasing power?
Token Coins
Are U.S coins token or full-bodied coins?
Fiat Money
What is the name given to unbacked money when it is issued by governmental decree?
1. Faith that others will accept the money we have accepted.
2. The limited quantity of money that exists.
What 2 Factors keep a fiat monetary system functioning?
Fiat Money
What type of money does the United States currently use?
The reason why commercial banks also can be referred to as full-service banks because they offer a wide range of financial services such as checking accounts, savings accounts, individual and business
Why can commercial banks also be referred to as full-service banks.
Monetarist: the stability of the economy depends on the supply of money in circulation.
Milton Friedman