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chapter 11: money and banking (medium of exchange- something accepted by…
chapter 11: money and banking
barter economy- money-less economy that relies on trade
medium of exchange- something accepted by all parties as payment for goods and servicesd
(MSB)- depositor-owned financial organization operated only for the benefit of its depositors
savings banks-were no longer mutually owned by depositors
measure of value- common denominator that can be used to express worth in terms that most individuals understand
store of value- property that allows purchasing power to be saved until needed
commodity money- money that has an alternative use as an economic good, or commodity
federal reserve system-fed, as the nation's first true central bank
fiat money- money by government decree - such as the tiny, metallic coins used in Asia Minor in the seventh century B.C.
specie- money in the form of coins made from silver or gold-was also used in the colonies
bank holiday- brief period during which every bank in the country was required to close
monetary unit- standard unit of currency, in the U.S. money system
monetary standard- mechanism designed to keep the money supply portable, durable, divisible, and limited in supply- helps with this task
state banks-banks that received their charter to operate from a state government
legal tender-fiat currency that must be accepted inpayment for debts
united state notes- new federal fiat currency that also had no gold or silver backing
Treasury coin notes- paper currency issued by the Treasury that was redeemable in both gold and silver
national banks- privately owned banks
NOW accounts- type of checking account that pays interest
credit union- nonprofit service cooperative that is owned by, and operated for, the benefit of its members
share draft accounts- interest- earning checking accounts, to compete with NOW accounts
national bank notes- paper currency of uniform appearance that was backed by United States government bonds
gold certificates- paper currency backed by gold placed on deposit with the United State Treasury
silver certificates- paper currency backed by silver dollars and bullion placed on reserve with the Treasury
gold standard- monetary standard under which the basic currency unit is equal to, and can be exchanged for, a specific amount of gold
deregulation- removal or relaxation of government restrictions on business
creditor- person or institution to whom money is owned - and sue the bank's owners to recover the rest
in-convertible fiat money standard- monetary standard under which the fiat money supply cannot be converted into gold or silver by its citizen
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federal reverse notes- paper currency issued by the fed that eventually replaced all other types of federal currency- were added to the money supply
central bank- bank that can lend to other banks in times of need
run on the bank- rush by depositors to withdraw their funds from a bank before it failed
commercial banks- banks that catered to the interests of business and commerce
(DDAs)- accounts whose funds could be removed by simply writing a check without prior approval from the depository institution
thrift institution- thrifts, accepted the deposits of small investors but did not have DDAs until the mid-1970s
(S&L)- depository institution that invests the majority of its funds in home mortgages