Download Ch 10 SG

STUDY GUIDE – CHAPER 10 – MONEY/BANKING
1. all the money available in the U.S. economy
2. hold worth even if not used
3. coins and paper bills used as money
4. paper money printed during the Civil War
5. bank that belongs to the Federal Reserve
System
6. has value because the holder can exchange
it for something else of value
a. fiat money
b. commodity money
c. currency
d. foreclosure
e. member bank
f. central bank
g. representative
money
7. objects that have value themselves and that
also are used as money
h. store of value
8. has value because a government has ruled
that it can be used to pay debts
j. greenbacks
i. money supply
9. bank that can lend to other banks
10. seizure of property from borrowers who
are unable to pay back their loans
11. Which is the biggest disadvantage of using shells as money?
a. durability
c. uniformity
b. portability
d. divisibility
12. Why should you choose a bank loan instead of a loan from a finance
company?
a. Banks make their profits by c. Finance companies have
lending money.
fewer outlets than banks.
b. Banks usually keep only a
d. Finance companies usually
fraction of their funds on hand
charge higher interest rates
to lend.
than banks.
13. Which of the following is an example of demand deposits?
a. money in a mutual fund
c. traveler’s checks
b. credit cards
d. money in a checking account
14. When you buy with a debit card, where does the money come from?
a. your savings account
c. your checking account
b. a finance company
d. an automated clearing house
15. Penny paints a picture for John in exchange for a table that he
has built. How do Penny and John pay for their goods in this
transaction?
a. using a store of value
c. through bartering
b. through credit
d. with currency
16. In the 1990s, the Russian people were no longer willing to sell goods
and services in exchange for rubles. Which characteristic of money
did the currency lack?
a. acceptability
c. portability
b. uniformity
d. durability
17. In the 1980s, deregulation and high interest rates contributed to a
crisis in which area of the financial industry?
a. Federal Reserve banks
c. Savings and Loans
b. central banks
d. finance companies
18. anything used to determine value when
goods and services are exchanged
19. direct exchange of goods and services
20. a way to compare the value of goods
and services
a. barter
b. currency
c. medium of
exchange
d. specie
21. holds its worth even if not used or spent
e. store of value
22. coins and paper bills used as money
f. unit of account
23. gold or silver coins used to back paper money
24. Why is portability an important characteristic of money?
a. It would be hard to use money if everyone did not accept it.
b. It would be confusing if some dollar bills were worth more than others.
c. If we could not carry money with us, it would be hard to use.
d. If money did not last a long time, we could not use it to store value.
25. Why is divisibility an important characteristic of money?
a. It would be hard to use money if you always had to use exact change.
b. It would be annoying if you could not exchange money in foreign
countries.
c. Money would lose its value if there were an unlimited supply.
d. Money would have no value if it could not be exchanged for gold.
26. Which type of money has no value of its own but is valuable because
it can be exchanged for something else of value?
a. fiat
c. commodity
b. representative
d. specie
27. Why would commodity money be hard to use in most societies?
a. It cannot be used to pay taxes. c. It is not valuable in and of itself.
b. It is not backed by the
d. It is often not portable, durable,
government.
or divisible.
28. remove controls on something
a. default
29. when property is seized because a borrower
b. deregulate
c. Federal Reserve
cannot pay back a loan
notes
30. fail to pay back a loan
31. currency we use in the United States today
d. foreclosure
32. paper money issued during the Civil War
e. greenbacks
33. papers that show ownership or debt
f. securities
34. What is one reason the First Bank of the United States was established?
a. The government needed a way to pay its war debts.
b. The money system was confusing because every state had its own
currency.
c. People believed that the state banks were too powerful.
d. The national government wanted to own all the states’ gold.
35. What is one important disadvantage of the gold standard?
a. It allows the national bank to
become too powerful.
b. It allows the government to
print more money than it can
back with gold.
c. It limits the amount of money
in circulation.
d. It can lead to bank runs
because people want gold
instead of paper money.
36. What is one banking reform made during the Great Depression?
a. The government paid off loans for corporations.
b. The government created the Federal Reserve.
c. The government deregulated the banking industry.
d. The government created the Federal Deposit Insurance Corporation.
37. What was one cause of the Savings and Loan crisis in the 1980s?
a. not enough gold to back loans c.
too much regulation
b. losses from risky loans
d. defaults on subprime mortgages
38.
owned and controlled by its members
money in a checking account that must be
paid out at any time
39.
a. credit card
b. credit union
40.
lets you buy now but pay later
c. debit card
41.
amount of money borrowed in a loan
d. demand
card that lets you withdraw money from
your checking account
42.
43.
money paid for the use of borrowed money
deposit
e. interest
f. principal
44. What is an important characteristic of the M1 money supply?
a. liquidity
c. flexibility
b. durability
d. solidity
45. What is fractional reserve banking?
a. Only some deposits must
c. People transfer money and
be paid on demand.
pay
bills electronically.
b. Banks lend only some of their
d. Banks keep some money on
money as mortgages.
hand and lend out the rest.
46. What is compound interest?
a. It is interest paid by corporations.
b. It is interest paid at an adjustable rate.
c. It is interest paid on both the principal and the interest it earns.
d. It is interest paid on a mortgage.
47. What is the largest source of income for banks?
a. money earned from
c. fees charged for ATMs and
investing in the stock market
checking accounts
b. interest received on loans
d. interest paid on savings
to customers
accounts and other deposits