Money and Banking Industry
- What is money? - a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively.
- 3 uses of money? - Buying/selling goods & services, common standard for measuring relative worth of goods and service, the most liquid asset.
- 6 characteristics of money? - Generally acceptable, easily counted & measured, durable, convenient, easily controlled, inexpensive to produce.
- What are the sources of money's value? - Commodity money, Representative money, Fiat money.
- Source of value for U.S. money? - Fiat money
History of Banking
- What was the role of the First Bank of the United States created in 1791? - Establish financial order, establish credit, resolve the issue of the fiat currency.
- What happened in 1832 when the Bank of 1811 lost its charter? -The Bank War: refers to the political struggle that developed over the issue of rechartering the Second Bank of the United States.
- What is the Federal Reserve? - The central banking system of the United States.
- What is the role of the Federal Reserve today? - Created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.
- What is FDIC and when and why was it created? - a United States government corporation operating as an independent agency created by the Banking Act of 1933.
- How do economists measure the U.S. money supply? - One measurement economists use to do so is labeled M1. This measurement of the money supply includes only fiat money (paper currency and coins) and demand deposits like checking accounts. M2 consists of fiat money, demand deposits, and near money. M1 represents the portion of the money supply with the highest liquidity.
- What services do banks provide? - Pay your bills, deposit money, withdraw money.
- Banks use depositors' money to make loans. The amount of interest the banks collect on the loans is greater than the amount of interest they pay to customers with savings accounts—and the difference is the banks' profit.
- What are the different types of financial institutions? - Depositary institutions, Contractual institutions
- How has electronic banking affected the banking world? - Online banking provides consumers with a convenient method of conducting bank business from the comfort and security of their own home and personal computer.