Economics Study Guide

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Economics CHAPTER 13 REVIEW

1.     The FDIC insures all federal banks.

2.     An ATM (Automatic Teller Machine) allows you to get money from your bank account without going to the bank.

3.     A PIN (Personal Identification Number) allows you to have access to your personal banking account

4.     Mutual Savings Banks were initially set up to serve people who wished to make small deposits or small loans

5.     Examples of AUTOMATIC BANKING

a.    ATM: Automatic Teller Machine

b.    Home Banking

c.     Point of Sale Terminal

d.    ACH: Automatic Clearing House Services

e.    EFT: Electronic Funds Transfer

6.     FIAT money (currency) has no true value in and of itself. Example: American Money (currency)

7.     Commodity Money is money that is also valuable by itself. Example: Gold, Silver are used as money

8.     Saving and Loan (S and L) was originally created to help people borrow money to build homes.

9.     EFT (Electronic Funds Transfer) is when your money is moved from one account to another by computer electronically.

10.  Bartering is trading one good or service for another good or service. It is NOT a function of money.

11.  3 MAIN FUNCTIONS OF US MONEY

1.  Medium of Exchange

o   Sellers accept an item as payment for goods and services

2. Standard of Value

§  When the general public uses the cost of an item to determine the quality of that item

3. Store of Value

§  When people put money in a savings account, they are storing its value

§  For money to keep its STORE OF VALUE

·       It must be nonperishable

·       It must keep its value over time

12.  5 MAJOR CHARACTERISTICS OF MONEY

Durability:

Money must last and can be used over and over again

Portability:

You must be able to carry money from place to place very easily

Moneys ability to be carried easy in your pocket

Divisibility:

Ability to be divided into smaller amounts, We have to be able to make change

If the smallest unit of U.S. money was the $100 bill, then it would not have divisibility.

Stability in Value:

Must maintain its value and remain stable in price

The fact that a quarter minted in 1968 is worth the same today as a quarter minted in 2008.

Acceptability:

All people are willing to accept it in exchange for service and goods

If a person from another country tried to use their currency in the U.S. they would find that it did not have acceptability (because it wouldn’t be accepted)