Economics Chapter 10 Flashcards

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Questions and Answers

What is money?

A unit of account

A store of value

Anything that serves as a medium of exchange

All of the above (correct)

What does medium of exchange mean?

Anything that is used to determine value during the exchange of goods and services.

What is barter?

The direct exchange of one set of goods or services for another.

Define unit of account.

A means for comparing the values of goods and services. Signup and view all the answers

What is a store of value?

Something that keeps its value if it is stored rather than spent. Signup and view all the answers

What does currency refer to?

Coins and paper bills used as money. Signup and view all the answers

What is commodity money?

Objects that have value in and of themselves and that are also used as money. Signup and view all the answers

Define representative money.

Objects that have value because the holder can exchange them for something else of value. Signup and view all the answers

What is specie?

Coined money, usually gold or silver, used to back paper money. Signup and view all the answers

Define fiat money.

Objects that have value because a government has decreed that they are an acceptable means to pay debts. Signup and view all the answers

What is a bank?

An institution for receiving, keeping, and lending money. Signup and view all the answers

What is a national bank?

A bank chartered by the federal government. Signup and view all the answers

What does bank run mean?

A widespread panic in which many people try to redeem their paper money at the same time. Signup and view all the answers

What is a greenback?

A paper currency issued during the Civil War. Signup and view all the answers

Define gold standard.

A monetary system in which paper money and coins had the value of certain amounts of gold. Signup and view all the answers

What is a central bank?

A bank that can lend to other banks in times of need. Signup and view all the answers

What is a member bank?

A bank that belongs to the Federal Reserve System. Signup and view all the answers

What does foreclosure mean?

The seizure of property from the borrowers who repay their loans. Signup and view all the answers

What is money supply?

All the money available in the United States economy. Signup and view all the answers

Define liquidity.

The ability to be used as, or directly converted into, cash. Signup and view all the answers

What is a demand deposit?

Money in a checking account that can be paid out 'on demand', or at any time. Signup and view all the answers

What does money market mutual fund mean?

A fund that pools money from small savers to purchase short-term government and corporate securities. Signup and view all the answers

Define fractional reserve banking.

A banking system that keeps only a fraction of its funds on hand and lends out the remainder. Signup and view all the answers

What does default mean?

Failing to pay back a loan. Signup and view all the answers

What is a mortgage?

A specific type of loan that is used to buy real estate. Signup and view all the answers

Define credit card.

A card entitling its owner to buy goods and services based on the owner's promise to pay for those goods and services. Signup and view all the answers

What is interest?

The price paid for the use of borrowed money. Signup and view all the answers

Define principal.

The amount of money borrowed. Signup and view all the answers

What does debit card mean?

A card used to withdraw money from a bank account. Signup and view all the answers

What is a creditor?

A person or institution to whom money is owed. Signup and view all the answers

Study Notes

Money and Its Functions

Money serves as a medium of exchange, unit of account, and store of value.
Medium of exchange facilitates value determination during transactions involving goods and services.
Barter is the direct trade of goods and services without using money.

Functions of Money

Unit of account allows comparison of values between different goods and services.
Store of value maintains its worth over time when saved instead of spent.

Types of Money

Currency consists of coins and paper bills recognized as money.
Commodity money holds intrinsic value and can be used as money (e.g., gold, silver).
Representative money derives value from being exchangeable for a commodity of value.
Specie is a form of money made from precious metals like gold or silver.
Fiat money has value because a government declares it an acceptable payment method.

Banking Institutions

Banks are institutions that manage money through receiving, safeguarding, and lending.
National banks are chartered by the federal government to operate.
A bank run occurs when many customers attempt to withdraw funds simultaneously, fearing insolvency.

Monetary Systems and Standards

Greenbacks were paper currency used in the U.S. during the Civil War.
The gold standard ties paper money's value to a specific amount of gold.
Central banks lend to other banks during financial distress, acting as a financial safety net.

Banking Operations

Member banks are part of the Federal Reserve System, which manages U.S. monetary policy.
Foreclosure refers to the process where property is seized from borrowers failing to repay loans.

Money Supply and Liquidity

The money supply encompasses all money circulating within the U.S. economy.
Liquidity indicates how easily an asset can be converted into cash.

Types of Deposits and Funds

Demand deposits are funds in checking accounts accessible at any time.
Money market mutual funds pool contributions from individuals to invest in short-term securities.

Banking Practices

Fractional reserve banking keeps a portion of deposits available while lending out the rest.
A default occurs when a borrower does not repay a loan.

Loans and Credit

Mortgages are specialized loans for purchasing real estate.
Credit cards allow consumers to buy goods/services with a promise to repay later.
Interest is the cost incurred for borrowing money, while the principal is the initial loan amount.
Debit cards enable users to withdraw funds directly from their bank accounts.
Creditors are individuals or entities to whom money is owed.

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Test your knowledge with these flashcards on key concepts from Economics Chapter 10. Learn essential terms like money, medium of exchange, and barter, and understand their definitions and roles in the economy. Perfect for quick study and review.