Chapter 15

Question 1

Money

Answer 1

anything that is accepted as payment for goods/services

Question 2

Currency

Answer 2

cash held in the form of coins and paper money

Question 3

Domestic Demand

Answer 3

influenced primarily by prices for goods and services, income levels, and the availability of alternate payment methods such as credit cards

Question 4

Foreign Demand

Answer 4

influenced by the political and economic uncertainties associated with some foreign currencies, and recent estimates suggest that between one-half and two-thirds of the value of currency in circulation is held abroad

Question 5

BEP

Answer 5

Treasury’s Bureau of Engraving & Printing

Question 6

Demand Deposits

Answer 6

consists of money kept in checking accounts that can be withdrawn by depositors on demand

Question 7

Time Deposits

Answer 7

deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand

Question 8

M1

Answer 8

used to describe the total amount of readily available money in the system and includes currency and demand deposits

Question 9

M2

Answer 9

included M1 money plus time deposits and other money that is not immediately accesible

Question 10

Federal Reserve System (the Feds)

Answer 10

created in 1913, the central bank of the US

Question 11

Federal Open Market Committee (FOMC)

Answer 11

Fed policy-making body

Question 12

Open Market Operations

Answer 12

most frequent tool - involves the purchase or sale of US government bonds

Question 13

Treasury bonds

Answer 13

long-term loans (5+yrs) made by businesses and individuals to the government

Question 14

Reserve Requirements

Answer 14

as part of the Feds, banks must hold some of their deposits in cash in their vaults or in an account at a district bank

Question 15

Discount Rates

Answer 15

the interest rate charged to member banks by the Feds

Question 16

Selective Credit Control

Answer 16

setting rules on credit

Question 17

Consumer Credit Rules

Answer 17

establish the minimum down payment and maximum repayment periods for consumer loans

Question 18

Margin Requirements

Answer 18

specify the minimum amount of cash an investor must put up to buy securities or investment certificates issued by corporations/governments

Question 19

Float

Answer 19

allows the check writer to retain the funds until the check clears when the funds are actually withdrawn from its account

Question 20

Dodd-Frank Act

Answer 20

created an oversight council to monitor risks that affect the financial industry

Question 21

Financial Intermediation

Answer 21

process in which institutions accept savers’ deposits and invest them in financial products (loans) that expected to produce a return

Question 22

Households

Answer 22

suppliers of funds

Question 23

Businesses and Government

Answer 23

demander of funds

Question 24

Depository Financial Institutions (DFI)

Answer 24

accept deposits

Question 25

Commercial Banks (DFI)

Answer 25

a profit-oriented financial institution that accepts deposits, make business and consumer loans; privately-owned

Question 26

Bank Charter

Answer 26

an operating license

Question 27

National Banks (DFI)

Answer 27

chartered b the Comptroller of Currency, part of the US Treasury Department; must belong to the Feds and be insured by the FDIC

Question 28

State Banks (DFI)

Answer 28

chartered by the state in which they are based; not required to belong to the Feds

Question 29

Thrift Institutions

Answer 29

depository institution personally designed to encourage household saving and to make home mortgage loans

Question 30

Savings & Loans Association (S&Ls) (Thrift)

Answer 30

keep large %s of their assets in home mortgages

Question 31

Saving Banks (Thrift)

Answer 31

focus less on mortgage and more on stock and bond investments

Question 32

ACSI

Answer 32

American Consumer Satisfaction Index

Question 33

Credit Unions

Answer 33

not-for-profit, member-owned financial cooperative

Question 34

Non-Depository Financial Institutions (Non-DFI)

Answer 34

do not accept deposits but do provide certain banking services

Question 35

Insurance Company (Non-DFI)

Answer 35

major suppliers of funds

Question 36

Cat-Risk Businesses

Answer 36

forecast potential weather-related expenses for insurers through sophisticated computer modeling that analyzes historical meteorological data

Question 37

Pension Funds (Non-DFI)

Answer 37

large pools of money set aside for later use in retirement benefits to employees or member

Question 38

Brokerage Firm (Non-DFI)

Answer 38

buys and sells securities (bonds & stocks) for its clients and gives them related advice

Question 39

Finance Company (Non-DFI)

Answer 39

makes short-term loans for which the borrower puts up tangible assets as security

Question 40

Commercial Finance Loans

Answer 40

gives loans to promising new businesses with no track record and firms that can't get more credit from a bank

Question 41

Consumer Finance Loans

Answer 41

loans to individuals, often to cover lease or purchase of large consumer goods

Question 42

Banking Act of 1933

Answer 42

empowered the Federal Reserve System to regulate banks and reform the bank system; created the FDIC

Question 43

Federal Saving and Loan Insurance Corporation (FSLIC)(1934)

Answer 43

formed to insure deposits at S&Ls; went bankrupt in the 1980s

Question 44

Deposit Insurance Funds (DIF)

Answer 44

provides deposit insurance to commercial banks and thrift institutions

Question 45

National Credit Union Share Insurance Fund

Answer 45

provides deposit insurance to credit unions

Question 46

Federal Deposit Insurance Corporation (FDIC)

Answer 46

independent, quasi-public corporation backed by the US government

Question 47

Conversational Commerce

Answer 47

interacting with customers via messaging and digital platforms