Chapter 15 | Money and the Financial System

These flashcards cover key concepts related to money, the financial system, and institutions talked about in Chapter 15 of the course material.

Money

Anything generally accepted in exchange for goods and services; also called currency.

Medium of Exchange

A function of money that allows it to be used to facilitate trade.

Measure of Value

A function of money that provides a common standard for valuing goods and services.

Store of Value

A function of money that allows individuals to save and accumulate wealth.

Fiat Money

Currency that does not have intrinsic value and is not backed by physical commodities.

Federal Reserve Board

An independent agency of the federal government established in 1913 to regulate the nation's banking and financial industry.

Commercial Banks

The largest and oldest financial institutions that rely mainly on checking and savings accounts for funds to lend.

Savings and Loan Associations (S&Ls)

Financial institutions that primarily offer savings accounts and make long-term loans for residential mortgages.

Credit Unions

Financial institutions owned and controlled by their depositors, who usually share a common affiliation.

Pension Funds

Managed investment pools set aside to provide retirement income for members.

Mutual Funds

Investment companies that pool individual investor dollars to invest in a diverse portfolio of securities.

Counterfeiting

The illegal production of currency which undermines the integrity of the financial system.

Cryptocurrency

A digital exchange medium that utilizes blockchain technology for secure transactions.

Checking Account

A demand deposit account that allows withdrawals and deposits without advance notice.

Savings Accounts

Accounts with funds that usually cannot be withdrawn without advance notice, often earning interest.

Certificates of Deposit (CDs)

Savings accounts that guarantee a set interest rate over a specific interval, penalizing early withdrawals.

Debit Card

A card that directly deducts from a checking account, used for electronic payments.

Credit Card

A means of access to preapproved lines of credit granted by a bank or finance company.

Money Market Accounts

Accounts that offer higher interest rates than standard bank accounts but with greater restrictions.

Finance Companies

Businesses that offer short-term loans at substantially higher rates than banks.

Electronic Funds Transfer (EFT)

Any movement of funds by means of electronic terminals or networks.

Peer-to-Peer Payment Apps

Mobile applications that allow individuals to make money transfers directly from one person to another.

Inflation

The rate at which the general level of prices for goods and services is rising.

Deflation

A decrease in the general price level of goods and services.

Asset-backed Securities

Financial securities backed by a loan, lease, or receivables against assets.

Regulatory Functions of the Federal Reserve

The responsibilities of the Federal Reserve to supervise and regulate financial institutions.

Monetary Policy

The actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals.

Open Market Operations

The buying and selling of government securities by the Federal Reserve to control the money supply.

Discount Rate

The interest rate at which commercial banks can borrow money directly from the Federal Reserve.

Reserve Requirement

The percentage of deposits that banks must hold in reserve and not lend out.

Qualities of Money

Characteristics that make money effective, including divisibility, portability, durability, stability, and acceptability.

Barter System

A system of exchange where goods or services are directly exchanged for other goods or services without the use of money.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Stocks

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

Bonds

A debt security, where the issuer owes the holder a debt and is obliged to pay interest (or to repay the principal at a later date).