Chapter 16 - Intro to Business

M-1

measure of the money supply that includes only the
most liquid (spendable) forms of money

M-2

measure of the money
supply that includes all
the components of M-1
plus the forms of money
that can be easily
converted into
spendable forms

Time Deposit

bank funds that have a fixed term of time to maturity
and cannot be withdrawn earlier or transferred by
check

Money Market Mutual Fund

fund of short-term, low-risk financial securities
purchased with the pooled assets of investor-owners

Commercial Bank

company that accepts
deposits that it uses to
make loans, earn
profits, pay interest to
depositors, and pay
dividends to owners

Savings and Loan Association

financial institution
accepting deposits and
making loans primarily
for home mortgages

Mutual Savings Bank

financial institution
whose depositors are
owners sharing in its
profits

Credit Union

nonprofit, cooperative
financial institution
owned and run by its
members, usually
employees of a
particular organization

Pension Fund

nondeposit pool of funds managed to provide
retirement income for its members

Insurance Company

nondeposit institution that invests funds collected as
premiums charged for insurance coverage

Finance company

nondeposit institution that specializes in making loans
to businesses and consumers

Securities Investment Dealer

financial institution that buys and sells stocks and
bonds both for investors and for its own accounts

Individual Retirement Account

tax-deferred pension fund that wage earners set up to
supplement retirement funds

Trust Services

management by a bank of an estate, investments, or
other assets on behalf of an individual

Letter of Credit

bank promise, issued for a buyer, to pay a designated
firm a certain amount of money if specified conditions
are met

Banker’s Acceptance

bank promise, issued for a buyer, to pay a designated
firm a specified amount at a future date

Electronic Funds Transfer (EFT)

communication of fund-transfer information over wire,
cable, or microwave

Automated Teller Machine

electronic machine that allows bank customers to
conduct account-related activities 24 hours a day, 7
days a week

Federal Deposit Insurance Corporation (FDIC)

federal agency that guarantees the safety of deposits
up to $250,000 in the financial institutions that it
insures

Federal Reserve System (The Fed)

central bank of the United States, which acts as the
government’s bank, serves member commercial banks,
and controls the nation’s money supply

Monetary Policy

management of the nation’s economic growth by
managing the money supply and interest rates

Reserve Requirement

percentage of its deposits that a bank must hold in
cash or on deposit with the Fed

Discount Rate

interest rate at which member banks can borrow
money from the Fed

Federal Funds Rate (Key Rate)

interest rate at which commercial banks lend reserves
to each other, usually overnight

Open-Market Operations

the Fed’s sale and purchase of securities in the open
market

Blink Credit Card

uses a computer chip that sends radio-frequency
signals in place of the magnetic strips that are
embedded in credit cards

Debit Card

plastic card that allows an individual to transfer money
between accounts

Point-of-Sale (POS) Terminal

electronic device programmed with electronic money
that transfers funds from the customer’s bank account
to pay for retail purchases

Smart Card

credit-card-sized plastic card with an embedded
computer chip that can be programmed with electronic
money

Exchange Rate

the value of one currency compared to the value of
another