Economics and Personal Finance - Unit 4: Banking, Financial Institutions, and Monetary Policy

Vocabulary practice flashcards covering banking concepts, account types, payment mechanisms, financial institutions, and Federal Reserve monetary policy from the Unit 4 Economics and Personal Finance curriculum.

Credit Union

A non-profit financial institution that is owned and operated by its members.

Certificate of Deposit (CD)

A specialized savings account that holds a fixed amount of money for a fixed period of time, in return earning interest for the investor.

Disclosure Statement

A document provided by a financial institution to give customers essential information regarding terms, conditions, fees, and risks.

Savings Account Interest Rate

The rate of return earned on deposited funds, which is typically higher than the interest rate offered on a standard checking account.

Money Market Account (MMA)

A type of savings account that typically earns a higher interest rate than a regular savings account.

Safe Deposit Box

An individually secured container at a financial institution best used for securely storing important documents and valuables.

Overdraft Fee

A penalty fee charged against a checking account when a customer spends more money than is currently available in the account.

Micro-Payment Provider

A modern retail financing service that enables consumers to pay for purchases across several smaller, interest-free installments.

Digital Payment Processing Solution

An electronic platform or mobile application, such as PayPal, Cash App, or Venmo, that allows users to send money digitally.

Cryptocurrency

A digital or virtual currency that is nearly impossible to counterfeit and typically operates independently of any central bank.

Check Card / Debit Card

A banking payment card used to make purchases or withdraw cash directly from available funds in a linked checking account.

Direct Deposit

The automated electronic transfer of funds, such as wages or salary, directly into an account holder's bank account.

Online and Mobile Banking

A banking service providing 24/7 access to account management, electronic bill payments, and fund transfers from digital devices.

Credit Card

A payment card that draws upon an approved line of borrowed money that must be repaid, unlike a debit card which deducts cash directly from checking.

Risks of Online Banking

Trade-offs associated with digital banking platforms, specifically heightened exposure to privacy and security risks and reduced access to personalized service.

Socio-Economic Impact of Commercial Lending

The broader economic outcome achieved when institutions lend for home construction and businesses, fostering job creation, expansion, and higher living standards.

Long-Term Certificate of Deposit Strategy

An investment choice suited for individuals who can leave savings untouched for several years in order to secure the highest available fixed interest return.

FDIC Insurance

Government-backed deposit protection guaranteeing that an account holder's deposited funds remain safe up to the legal insurance limit if a bank fails.

Savings Account

A deposit account designed to help money grow by paying interest on funds stored for future use.

Foreign Exchange Market

The global financial market whose primary function is to facilitate the buying and selling of different national currencies.

Exchange Rate Impact on Trade

The economic principle where a weaker domestic currency makes imports more expensive and exports cheaper to foreign buyers.

Cryptocurrency in International Finance

An alternative, decentralized digital medium of exchange used internationally for cross-border financial transfers and investments.

Functions of Money

The three primary economic roles performed by money: serving as a medium of exchange, a unit of account, and a store of value.

Financial Markets

Systems that benefit the economy by connecting entities with surplus funds (lenders) to entities requiring capital (borrowers) for productive use.

Financial Intermediaries

Institutions, such as commercial banks and credit unions, that channel and facilitate the efficient flow of funds between savers and borrowers.

Federal Reserve

The central banking system of the United States, responsible for conducting national monetary policy and supervising the banking system.

Federal Discount Rate

The benchmark interest rate charged by the Federal Reserve to commercial banks borrowing directly from it, influencing broader lending rates.

Expansionary Monetary Policy

Monetary actions implemented by the central bank designed to increase employment and stimulate overall economic output.

Open Market Operations

A monetary policy mechanism where the central bank buys government securities to increase commercial bank reserves and expand the money supply.

1873-1913: Financial Panics and the Creation of the Federal Reserve

A historical era of recurring economic panics that highlighted the need for a national central bank to supply a flexible currency.

1929-1941: Great Depression

A historical period marked by widespread banking collapse that resulted in the establishment of the FDIC and modernized Federal Reserve policymaking.