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Busn 101 Chapter 15
Chapter 15
| Question | Answer |
|---|---|
| finance | the study of money, how its made, how its lost and why |
| money | anything generally accepted in exchange for goods and services |
| functions of money | medium of exchange, measure of value, and store of value |
| medium of exchange | accepted as payment for products and resources |
| measure of value | single standard for assigning and comparing values of products and resources |
| store of value | means of retaining and accumulating wealth |
| characteristics of money | acceptability, divisibility, portability, stability, durability, and difficulty to counterfeit |
| life expectancy of paper currency | $1= 1.8 yr $5= 1.3 yr $10= 1.5 yr $20= 2 yr $50= 4.6 yr $100= 7.4 yr |
| types of money | checking account, savings account, money market account, certificate of deposit, credit card, debit card, travelers check, money order, cashiers check |
| Fact about checks 1 | about 13 million US households do not have checking accounts |
| Fact about checks 2 | 180 million checks are cashed annually in 3,700 check-cashing stores for a value of %55 billion |
| Fact about checks 3 | 85% of checks cashed are payroll checks and the avg. check is about $300 |
| Two Major credit cards | Master Card and Visa |
| American Express | Dominant travel and entertainment card |
| American Credit Card Debt | Americans Hold over $675 billion in credit card debt |
| Debit card | looks like a credit card but works like a check |
| how debit cards work | gives a direct, immediate electronic payment to a merchant from the cardholder's checking account |
| Debit cards lack: | credit, no "grace period" and no paper trail of transactions |
| Federal Reserve System | An independent agency of the federal government established in 1913 to regulate the nation's banking and financial industry |
| Banking institutions | businesses whose objective is to earn money by managing, safeguarding, and lending money to others |
| Functions of federal reserve board | -control money supply with monetary policy -regulate financial institutions -manage regional and national check clearing procedures -supervise the federal deposit insurance of commercial banks in the federal reserve system |
| Federal Reserve's Monetary Policy | -open marker operations -reserve requirements -discount rate -credit controls |
| buy government securities | the money supply increases; economic activity increases |
| sell government securities | money supply decreases; economic activity slows down |
| raise discount rate | interest rate increases; money supply decreases; economic activity slows down |
| lower discount rate | interest rates decrease; money supply increases; economic activity increases |
| increase reserve requirements | banks make fewer loans; money supply declines; economic activity slows down |
| decrease reserve requirements | banks make more loans; money supply increases; economic activity increases |
| relax credit controls | more people are encouraged to make major purchases, increasing economic activity |
| restrict credit controls | people discouraged from making major purchases, decreasing economic activity |
| banking institutions examples: | commercial banks, savings and loan associations, credit unions, mutual savings banks |
| Insurance for banking institutions | Federal deposit insurance corporation (FDIC), National credit union association (NCUA) |
| FDIC | insures personal accounts up to a maximum of $100,000 |
| NCUA | regulates and charters credit unions and insures their deposits through its national credit union insurance fund |
| Non-Banking institutions | insurance companies, pension funds, mutual funds, brokerage firms, non-financial firms, finance companies |
| Electronic banking | ETF- electronic funds transfer ATM- automated teller machine ACHs- automates clearinghouses online banking |
| Top five ATM owners | Bank of america, wells fargo, E-Trade bank, American Express, and Bank One |
| Average ATM withdrawal | $60 |
| How much more ATM customers spend than non ATM customers | 20-25% |
| percentage of americans ages 25-34 that use ATMs 8 times a month | 60% |
| Most popular day for ATM usage | Friday |
| Challenges in commercial banking industry | some commercial banks made poor managerial decisions in the early 1980s, resulting in several failures -gramm-leach-bliley bill |
| gramm-leach-bliley bill | banks were allowed to offer insurance, brokerage, and investment banking services |
Created by:
slstrong90
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