Key Terms – Chapters 15 & 16

Commercial banks

For-profit financial institutions that offer a variety of services, using deposited money to generate earnings through loans and investments.

Credit unions

Non-profit financial institutions often formed around a common group, offering limited services and charging only enough interest to maintain operations.

Federal Deposit Insurance Corporation (FDIC)

A U.S. government agency that guarantees the safety of deposits in banks, up to $250,000 per account.

Federal Reserve System

An independent government agency responsible for monetary policy, managing money supply and interest rates to influence the economy.

Open market operations

The Federal Reserve's process of buying and selling treasury bonds to control the money supply in the economy.

Discount rate

The interest rate the Federal Reserve charges banks for loans, impacting the economy's borrowing capacity.

Reserve requirement

The amount of funds that banks must hold in reserve and not lend out, influencing their ability to create loans.

Bonds

A form of investment that represents a loan made by an investor to a borrower, typically a government or corporation.

Preferred stock

A type of stock that provides dividends before common stock dividends, typically without voting rights.

Common stock

Standard ownership in a company, offering potential investment returns and voting rights for shareholders.

Dividends

Payments made to stockholders from a company's earnings.

Retained earnings

Income retained by the company for reinvestment rather than paid out to shareholders.

Insider trading

The illegal practice of trading stocks based on confidential information not available to the public.

Mutual fund

An investment vehicle that pools funds from multiple investors to purchase shares in a diversified portfolio of stocks.

Mortgage loan

A loan specifically for purchasing real estate, usually requiring long-term repayment plans.