UNIT 4 REVIEW

Three functions of money

MEDIUM OF EXCHANGE ANYTHING THAT IS USED TO DETERMINE VALUE DURING THE EXCHANGE OF GOODS AND SERVICES. EXAMPLE: I will give you an apple for your pen.

UNIT OF ACCOUNT MONEY PROVIDES A MEANS FOR COMPARING THE VALUES OF GOODS AND SERVICES. EXAMPLE: Comparing the price of a pair of shoes at different stores.

STORE OF VALUE MONEY KEEPS ITS VALUE IF YOU DECIDE TO HOLD ON TO IT INSTEAD OF SPENDING IT. EXAMPLE: Saving your allowance to buy an IPOD.

SIX CHACTERISTICS OF MONEY

DURABILITY OBJECTS USED AS MONEY MUST WITHSTAND THE PHYSICAL WEAR AND TEAR WITH CONTINUED USE.

MONEY MUST BE ABLE TO EASILY BE TRANSFERRED TO ONE PERSON TO ANOTHER. PORTABILITY MONEY MUST BE ABLE TO EASILY BE TRANSFERRED TO ONE PERSON TO ANOTHER.

MONEY MUST BE EASILY MADE INTO SMALLER DEMONATIONS, UNITS OF VALUE. DIVISIBILITY MONEY MUST BE EASILY MADE INTO SMALLER DEMONATIONS, UNITS OF VALUE.

UNIFORMITY ANY TWO UNITS OF MONEY MUST BE THE SAME – IN TERMS OF WHAT THEYWILL BUY

LIMITED SUPPLY MONEY MUST KEEP THE RIGHT AMOUNT OF VALUE, THERE CANNOT BE TOO MUCH OR TOO LITTLE OF “IT”.

ACCEPTABILITY PEOPLE MUST BE ABLE TO EXCHANGE OBJECTS THAT SERVE AS MONEY FOR GOODS AND SERVICES.

COINS AND PAPERBILLS USED AS MONEY. CURRENCY COINS AND PAPERBILLS USED AS MONEY.

SOURCES OF MONey’s VALUE

COMMODITY MONEY SOMETHING THAT HAS VALUE IN AND OF ITSELF THAT CAN ALSO BE USED AS MONEY.

REPRESENTATIVE MONEY OBJECTS THAT HAVE VALUE BECAUSE YOU CAN EXCHANGE THEM FOR SOMETHING ELSE OF VALUE.

MONEY THAT HAS VALUE BECAUSE THE GOVERNMENT SAYS IT’S VALUABLE. FIAT MONEY MONEY THAT HAS VALUE BECAUSE THE GOVERNMENT SAYS IT’S VALUABLE.

History of banking in the united states

FEDERALISTS V. ANTI-FEDERALISTS Central Bank Regional Bank Local Bank FEDERERALISTS WANTED A CENTRAL BANK TO CONTROL ALL THE OTHER BANKS IN THE U.S ANTI-FEDERALISTS WANTED THE STATES TO CONTROL ALL OF THE BANKS WITHIN THEIR STATE

1ST BANK OF THE UNITED STATES PURPOSE OF THE BANK: Hold money collected in taxes Borrow money Issue representative money Keep an “eye” on the other banks in the U.S.

Free banking era AKA the Wildcat Era Contain many problems: Bank runs Wildcat Banks Fraud Different types of currency

BANK RUNS WIDESPREAD PANIC IN WHICH GREAT NUMBERS OF PEOPLE TRY TO REDEEM THEIR PAPERMONEY AT ONCE.

DURING THE CIVIL WAR THE SOUTH ISSUED CURRENCY BACKED BY COTTON. CURRENCY IN THE SOUTH DURING THE CIVIL WAR THE SOUTH ISSUED CURRENCY BACKED BY COTTON.

GOLD STANDARD MONETARY SYSTEM IN WHICH PAPER MONEY IS EQUAL TO A CERTAIN AMOUNT OF GOLD.

Federal reserve system THE NATION’S FIRST TRUE NATIONAL BANK.

FDIC THE PURPOSE IS TO MAKE SURE THAT CUSTOMERS DO NOT LOSE MONEY IF THE BANK FAILS.

ALL THE MONEY AVAILABLE IN THE ECONOMY. MONEY SUPPLY ALL THE MONEY AVAILABLE IN THE ECONOMY.

CURRENCY, CHECKS, DEBIT CARDS M1 CURRENCY, CHECKS, DEBIT CARDS

M2 AKA NEAR MONEY INCLUDES ALL M1 MONEY, PLUS MONEY THAT IS INVESTED OR SAVED

MOST COMMON TYPES OF BANK ACCOUNTS CHECKING SAVINGS

A LOAN THAT IS USED TO BUY REAL ESTATE. MORTAGE A LOAN THAT IS USED TO BUY REAL ESTATE.

INTEREST PRICED PAID FOR THE USE OF MONEY THE LARGEST SOURCE OF INCOME FOR BANKS

THE AMOUNT BORROWED ON A LOAN. PRINCIpal THE AMOUNT BORROWED ON A LOAN. LOAN

MUTUAL FUNDS POOL THE SAVINGS OF MANY INDIVIDUALS AND INVEST THIS MONEY IN A VARIETY OF AREAS

RETURN THE MONEY AN INVESTOR RECEIVES ABOVE AND BEYOND THE MONEY INITIALLY INVESTED.

PENSION FUNDS THE INCOME THAT A RETIREE RECEIVES AFTER WORKING A CERTAIN AMOUNT OF YEARS.

CD A VERY SAFE INVESTMENT BECAUSE IT IS GUARANTEED BY THE FEDERAL GOVERNMENT.

CERTIFICATES SOLD BY A COMPANY OR GOVERNMENT TO FINANCE PROJECTS. BONDS CERTIFICATES SOLD BY A COMPANY OR GOVERNMENT TO FINANCE PROJECTS.

SAVINGS BOND A VERY SAFE INVESTMENT BECAUSE IT IS BACKED BY THE GOVERNMENT THE MONEY IS USED TO HELP THE FEDERAL GOVERNMENT PAY ITS BILLS.

CORPORATE BONDS MONEY INVESTED IN A BUSINESS CAN BE A SAFE OR RISKY INVESTMENT DEPENDING ON THE BUSINESS.

ISSUED BY CITIES OR STATE GOVERNMENTS TO FINANCE PROJECTS. MUNICIPAL BONDS ISSUED BY CITIES OR STATE GOVERNMENTS TO FINANCE PROJECTS.

ISSUED BY HIGH RISK COMPANIES THESE ARE VERY RISKY INVESTMENTS. JUNK BONDS ISSUED BY HIGH RISK COMPANIES THESE ARE VERY RISKY INVESTMENTS.

MONEY THAT IS LENT FOR LONGER THAN ONE YEAR. Capital market MONEY THAT IS LENT FOR LONGER THAN ONE YEAR.

MONEY THAT IS LENT FOR LESS THAN ONE YEAR. MONEY MARKET MONEY THAT IS LENT FOR LESS THAN ONE YEAR.

PERCENT OF STOCK ISSUED. Shares

NEW YORK STOCK EXCHANGE THE LARGEST AND MOST ESTABLISHED STOCK EXCHANGE IN THE UNITED STATES. Created in 1792 NYSE

NASDAQ THE SECOND LARGEST STOCK EXCHANGE IN THE UNITED STATES. CREATED IN 1971. ALL EXCHANGES ARE COMPLETED OVER COMPUTER TERMINALS. NASDAQ

NAME GIVEN WHEN THE STOCK MARKET RISES. Bull market NAME GIVEN WHEN THE STOCK MARKET RISES.

PEOPLE WHO BUY STOCK ON A MINUTE BY MINUTE BASIS TO MAKE A PROFIT. DAY TRADING PEOPLE WHO BUY STOCK ON A MINUTE BY MINUTE BASIS TO MAKE A PROFIT.

NAME GIVEN WHEN THE STOCK MARKET FALLS. BEAR MARKET NAME GIVEN WHEN THE STOCK MARKET FALLS.

BLACK TUESDAY THE DAY WHEN A RECORD NUMBER OF SHARES WERE SOLD. SOME CONSIDERED THIS THE BEGINNING OF THE GREAT DEPRESSION.