Econ ch. 11 1. __________ is accepted by all parties as payment for goods & services. Money can be used to express ______ in terms that most people can understand.

Sec 1 2. Money holds its purchasing ______ until the buyer needs something. 3. The use of money developed in ancient times because it made life easier. A good like compressed tea leaves is known as _____________ money. ____ money is made valuable by government decree. 4. ___________ was once accepted as a form of currency in Colonial America.

Sec 1 5. States passed laws allowing individuals to print paper currency, which was backed in local banks with ____ & ____ deposits. 6. During the American Revolution, ___________ dollars were issued but w/o gold or silver backing, which made them virtually ________ by the end of the war. 7. _______, or gold & silver coins, were commonly used in the colonies. Because they were in _____________, they had more value than paper currency.

Sec 1 8. When the nation began, the most plentiful coin in circulation was the __________________. 9. Ben __________ & Alexander _______ differentiated the dollar system from the pesos by dividing the dollar into ______ rather than the peso’s pieces of _____. 10. Money must be ________, or easily transferred from one person to another.

Sec 1 11. Money must be ________ so it lasts when handled or stored for long periods. 12. Money must be _________ to facilitate all types of transactions. 13. Money must be in ________ supply to retain its value. (#10-13 are characteristics of money)

Sec 2 1. A ____________ standard keeps the money supply portable, durable, divisible, and limited in supply. 2. Continental currency after the Revolutionary War was worthless, so Americans only trusted _____. The United States ___________ gave the federal gov’t the power to coin money & prevented the states from doing so. Private banks produced paper money.

Sec 2 3. By _____ the nation had about 100 state banks, which had a charter from the state governments. People could exchange the paper notes for gold or silver. 4. Each bank had its own currency design so hundreds of different notes were in circulation. ___________ became a problem. Because some currencies did not have silver or gold backing, some merchants were wary to accept all forms of currency.

Sec 2 5. To finance the _________, Congress authorized in _____ the printing of $60 million of demand notes. They had no silver or gold backing, but the gov’t declared them legal tender. By 1862, Congress authorized a new federal currency. Both of these currencies were called _____________ because of their green ink.

Sec 2 6. In time, people feared that greenbacks had little value, like Continental dollars, and they avoided using them. Congress then created a National Banking System of national banks, which were privately owned but chartered by the federal gov’t. These banks issued National bank notes, backed by US gov’t bonds.

Sec 2 7. In ____ the federal gov’t issued gold certificates backed by gold, in large denominations for banks to exchange with one another. In 1886, it issued silver certificates backed by silver. 8. In 1900, Congress passed the _____ Standard Act, making the basic currency unit, the ______, equivalent to a specific amount of gold. It did not change the use of greenbacks or notes, but Americans could exchange them for gold.

Sec 2 9. The advantages of the gold standard are 1) the ________ Americans felt about their money and 2) it prevents the gov’t from _________ too much paper currency. 10. The disadvantages are 1) the gold stock may not grow ______ enough to support a growing economy 2) people may decide to convert their paper to gold, draining the gov’ts gold _______ 3) the price of gold will respond to the market & may ____ value 4) the political risk of failure exists

Sec 2 11. Since _____ the US has been on an ______________ fiat money standard. 12. The money supply of the US is managed by the federal gov’t. 13. The __________ component of modern money consists of coins & Federal Reserve notes. The intangible components include traveler’s checks and ___________ & savings accounts. 14. Modern money must also be portable, durable, and divisible.

Sec 3 1. The National Banking Act of 1863 strengthened the nation’s financial system by creating a system of national banks. 2. By 1907 the NSB needed further reforms as the nation experienced financial crisis and recessions. 3. Congress responded to the call for reform with the Federal _______ System, or the Fed, the nation’s first true central bank – a bank that lends to other banks in need.

Sec 3 4. The Fed was set up as a corporation and any bank with that joined the system had to purchase shares of ______ in the system; as a result, privately owned banks owned the Fed, not the gov’t. The Fed, however, is publicly controlled. The president appoints & Congress approves the Fed’s Board of Governors. 5. Banks were overextended during the 1920s, and many failed after the Great Depression hit in ______.

Sec 3 6. Banks did not have deposit insurance for their depositors, causing depositors’ rush on banks to withdraw funds. As a result, many more banks failed. The __________________________ insured customers deposits in the event of a bank failure. 7. Most of the first American banks were commercial banks that caterer to business and commerce.

Sec 3 8. A thrift institution accepts deposits of small investors but could not offer demand deposit accounts until the 1970s. The __________________ banks were the oldest thrift institutions in the US. They catered to the small wage earner. 9. A ____________ is a nonprofit service cooperative that is owned by & operated for the benefit of its members.

Sec 3 10. Financial institutions were closely regulated from the Great Depression through the 1970s. Federal regulation included setting maximum rates of interest & restricting how institution could lend their funds. The _____ administration deregulated the financial system. This led to more competition. 11. The _______s were years of more bank failures. During the 1990s, stronger federal regulations were enacted.