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Federal Reserve & Measurement Flashcards
Federal Reserve System and Measurement flashcards for Mr. Thompson's class. 11/02/2010.
45
Economics
9th Grade
11/03/2010

Additional Economics Flashcards

 


 

Cards

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.
Term

Barter

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Definition
To exchange a good or service for another good or service; trading.
Term

Business Cycle

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Definition
Periods 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.
Term

Certificate of Deposit

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Definition
long 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. a timed deposit that states the amount of the deposit, maturity, and rate of interest being paid.
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.
Term

Checking Account

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Definition
an 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allows you to write your payment for a good or service; a bank I.O.U. an account in which deposited money can be withdrawn at any time by writing a check; usually has little or no interest.
Term

Commercial Banks

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Definition
large financial institutions that lend money to profit institutions; ex. SunTrust & Bank of America; allows competition to help with loans. (singular) a financial institution that offers full banking services to individuals and businesses.
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.
Term

Consumer Price Index (CPI)

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Definition
a measure of the inflation rate based on the price of a "market basket" of typical household goods and services; it is compared over time. a measure of the change in price over time of a specific group of goods and services.
Term

Contraction

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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.
Term

Credit

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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.
Term

Credit Cards

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Definition
Consumer bank cards which allow consumers to borrow money; ex. MasterCard & Visa; they cause high interest to pay later.
Term

Credit Score

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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.
Term

Credit Unions

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Definition
nonprofit cooperative financial institutions that lend money; state employees can be members; allows workers to get together and help with banking.a nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services.
Term

Debt Cards

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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.
Term

Deregulation

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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.
Term

Discount Rate

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Definition
interest 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. the interest the Fed charges on its loans.
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.
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.
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.
Term

Federal Reserve

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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.
Term

Fiscal Policy

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Definition
the 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. the federal government's use of spending and taxation policies to affect overall business activity.
Term

GDP Per Capita

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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.
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!).
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.
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.
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.
Term

Gross Domestic Product (GDP)

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Definition
the 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.the total dollar value of all final goods and services produced in a country during a single year.
Term

Inflation

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Definition

A 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. a sustained increase in the general level of prices.

 

Term

Loose/Easy Money

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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.
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.
Term

Member Banks

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Definition
Banks that belong to the Federal Reserve system; most commericial banks are member banks; government backed banks.
Term

Monetary Policy

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Definition
actions 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.
Term

¥ Money ¥

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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.
Term

Open Market Operations

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Definition
when 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. the purchase or sale of U.S. government bonds and Treasury bills.
Term

Peak

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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.
Term

Real GDP

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Definition
GDP accustomed to price changes; takes inflation out of the picture in order to get a more accurate picture of the growth of our economy. GDP after adjustments for inflation.
Term

Recession

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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.
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.
Term

Savings Account

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Definition
an account that people use to store money for later use; usually pays the customer interest; a rainy day fund; piggy banks. an account in which customers receive interest based on how much money they have deposited.
Term

Standard of Living

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Definition
a 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. the material well-being of an individual, group, or nation measured by how well their necessities and luxuries are satisfied.
Term

Tight Money

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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.
Term

Tools of the Fed

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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.
Term

Trough

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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.
Term

Utility of Money

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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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