Term
1st and 2nd National Bank
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Definition
| The first two central banks of the U.S.; similar to today's Fed; helped fund the government in the first 150 years of debt. |
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Term
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Definition
| To exchange a good or service for another good or service; trading. |
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Term
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Definition
| ①Periods of economic expansion followed by contractions; consists of peaks, contractions, troughs, and expansions; the government may employ monetary and/or fiscal policies to smooth out the extremes. ②alternating periods of growth and decline that the economy goes through. |
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Term
Certificate of Deposit
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Definition
| ①long term place-to-place money that earns higher interest than savings but has high penalties for early withdrawal; a loan you give to a bank; a guaranteed safe investment in a bank. ②a timed deposit that states the amount of the deposit, maturity, and rate of interest being paid. |
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Term
Characteristics of Money
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Definition
| Good money is durable, portable, acceptable, divisible, uniform, and limited in supply (by the government); our dollar possesses all of these; our dollar is FIAT money. |
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Term
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Definition
| ①an account that people use to pay bills; it usually costs consumers interest; allows you to write your payment for a good or service; a bank I.O.U. ②an account in which deposited money can be withdrawn at any time by writing a check; usually has little or no interest. |
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Term
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Definition
| ①large financial institutions that lend money to profit institutions; ex. SunTrust & Bank of America; allows competition to help with loans. ②(singular) a financial institution that offers full banking services to individuals and businesses. |
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Term
Compound Interest
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Definition
| Occurs when interest is applied to the principle interest and the former interest; credit card companies apply it to your balance; can quickly lead to debt. |
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Term
Consumer Price Index (CPI)
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Definition
| ①a measure of the inflation rate based on the price of a "market basket" of typical household goods and services; it is compared over time. ②a measure of the change in price over time of a specific group of goods and services. |
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Term
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Definition
| A period of economic decline typically marked by a lower GDP; a time when the Fed may use loose monetary policy to get the economy going again. |
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Term
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Definition
| Money borrowed to pay for a good or service; a loan; without it, our economy would stop because it would be almost impossible to expand. |
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Definition
| Consumer bank cards which allow consumers to borrow money; ex. MasterCard & Visa; they cause high interest to pay later. |
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Definition
| A number that rates the likelihood of someone paying back a loan; an FICA score; a higher credit score means lower costs for loans. |
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Term
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Definition
| ①nonprofit cooperative financial institutions that lend money; state employees can be members; allows workers to get together and help with banking. ②a nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services. |
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Definition
| Consumer bank cards which draw money directly from the consumer's checking account; check cards; a smarter way to spend because there's no interest. |
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Term
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Definition
| When the government removes some control of the economy; ex. the Gramm-Leach-Bliley Act allows banks more freedom to offer services. |
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Term
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Definition
| ①interest the Fed charges banks for loans; if it goes up, the cost of money will most likely go up; it is eventually passed on to other banks and consumers which can either ease or tighten money. ②the interest the Fed charges on its loans. |
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Term
Economic Indicators
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Definition
| Statistics used largely to predict where the country is heading in the business cycle; ex. GDP, consumer confidence, durable good orders, and unemployment rate. |
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Term
Economic Measurement
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Definition
| A gauge of how healthy the economy is; based on economic indicators such as GDP, the unemployment rate, the stock market, and durable good orders; helps businesses and the government make decisions that will help the economy grow. |
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Term
Federal Deposit Insurance Corporation (FDIC)
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Definition
| Insures bank deposits up to $250,000; government deposit insurance; insurance on your savings. |
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Term
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Definition
| The central bank of the U.S.; headed by Benjamin Bernanke; it controls the nation's money supply and money policy. |
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Term
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Definition
| ①the government's policy on how to spend taxes and bond money; ex. Guns vs. Butter; it has a large impact on the nation's economic business cycle. ②the federal government's use of spending and taxation policies to affect overall business activity. |
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Term
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Definition
| The GDP of a country divided by the population of the country; it takes population growth out of the picture in order to get an accurate view of the growth of the economy. |
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Term
Glass-Steagall Act
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Definition
| A law that set up the Federal Deposit Insurance Corporation (FDIC); It makes consumers feel safe about keeping money in banks, which keeps that dollar bouncing around (from the cartoon!). |
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Term
Government Expenditures
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Definition
| All the levels of government spending money; mandatory expenditures is money that must be spent, and discretionary expenditures is money Congress can decide to spend; examples of Fed expenditures include defense, HHS, and Homeland Security. |
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Term
Government Securities
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Definition
| Bonds, notes, and other debt instruments sold by the Fed; the Fed sells and uses them as monetary tools; used to finance U.S. government borrowings. |
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Term
The Great Depression
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Definition
| The largest drop in the business cycle in U.S. history; occurred during the 1930's and caused major unemployment, a stock market crash, and a big increase in the government's role in the economy. |
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Term
Gross Domestic Product (GDP)
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Definition
| ①the value of all final goods and services produced in the country in a period of time; it is used to measure the health of the economy. ②the total dollar value of all final goods and services produced in a country during a single year. |
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Term
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Definition
①A rise in the price of goods and services; typically about 3% per year; eats at the value of our money; determined by the CPI; fight it with tight monetary policy. ②a sustained increase in the general level of prices.
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Term
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Definition
| When the supply of money in the market becomes greater, the Fed lowers the discount rate and reserve requirement or there is economic growth; it is easier to get a loan; economy grows but it may spark inflation. |
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Term
Medium of Exchange
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Definition
| Makes it so that people can use money as a form of exchange for goods and services; one of the functions of money; if you have an iPod that I want, I can give you $50 and you can give me the iPod. |
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Term
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Definition
| Banks that belong to the Federal Reserve system; most commericial banks are member banks; government backed banks. |
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Term
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Definition
| ①actions carried out by the Federal Reserve in order to regulate the money supply; "money-tary" policy; remember the three tools the Fed uses to tighten or loosen the money supply. ②a policy that involves changing the rate of growth of the money supply in circulation in order to affect the cost and availability of credit. |
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Term
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Definition
| Currency in paper form or coin form; anything that can be exchanged for goods and services; ex. dollar bills and credit cards; money can be a form of measurement, a form of exchange, and a storage of value. |
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Term
Open Market Operations
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Definition
| ①when the Fed sells U.S. bonds or buys them back; used to raise money for the governmnent to borrow; selling bonds results in tightening the money supply; buying bonds results in easing the money supply. ②the purchase or sale of U.S. government bonds and Treasury bills. |
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Term
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Definition
| A state in which the economy is at its highest point in the business cycle; typically characterized by a lower unemployment rate, higher consumer confidence, and stronger business growth. |
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Term
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Definition
| ①GDP accustomed to price changes; takes inflation out of the picture in order to get a more accurate picture of the growth of our economy. ②GDP after adjustments for inflation. |
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Term
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Definition
| A prolonged decrease in economic growth as indicated by negative growth in GDP, increased unemployment, and slow business growth over a period of at least 6 months. |
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Term
Reserve Requirement
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Definition
| Allows banks to loan a certain percentage of deposits; currently, banks keep 10% of all deposits; ex. a bank that receives an $100 deposit may lend out $90 of that deposit. |
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Term
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Definition
| ①an account that people use to store money for later use; usually pays the customer interest; a rainy day fund; piggy banks. ②an account in which customers receive interest based on how much money they have deposited. |
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Term
Standard of Living
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Definition
| ①a grade of the level of comfort of an individual or an entire economy; ex. the U.S. has a high standard of living (in material value), Haiti has a low standard of living. ②the material well-being of an individual, group, or nation measured by how well their necessities and luxuries are satisfied. |
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Term
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Definition
| Occurs when the supply of money in the market is low; the Fed raises the discount rate and reserve requirement or there is a credit crunch; makes it harder to get a loan and slows down the economy. |
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Term
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Definition
| How the supply of money is controlled; they are: increasing/lowering discount rate, increasing/lowering the Reserve Requirement, and selling/buying back U.S. bonds/securities; if you're in the market for a loan, you should pay attention to all three. |
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Term
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Definition
| A state in which the economy is at its lowest point in the business cycle; typically characterized by increased unemployment, lower consumer confidence, and slower business growth. |
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Term
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Definition
| How people use money; used as a form of measurement, a form of exchange, and a storage of value; ex. if you get paid on Friday and you can't spend your money until Wednesday, you can store the value of your work in the money you made. |
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