Economics-Mr. Doebbler-Chapter 10 Reading Questions-Money and Banking DIRECTIONS: Answer all of the questions from Chapter 10. 1. A _____________________ economy is a money less economy that relies on trade. 2. A ________________________ is a situation in which two people want exactly what the other has and is willing to trade what they have for it. 3. Life is ________________________ in an economy with money. 4. Commodity money is money that has an ______________________ as a economic good, or commodity. 5. ______________________________ is money by government decree. 6. Paper money was another _____________________ of fiat money. 7. Colonists also used modest amounts of ___________________ or money in the form of silver or gold coins. 8. Coins were the most desirable form of money not only because of their _______________ ______________, but because they were in the limited supply. 9. Mexican pesos were known as “______________________,” because they were divided eight subparts known as “bits.” 10. Rather that dividing the dollar into eights, it was divided into _______________, which was easier to understand. 11. List the four (4) characteristics of money: 1._________________ 2.________________ 3.________________ 4.__________________ 12. Money must be portable, or easily _____________________ from one person to another to make the exchange of money for products easier. 13. Money must be ____________________ so it does not deteriorate when it is handled. 14. Money should be easily divisible into _________________ because it loses its value whenever there is too much of it. 15. Money must be available but only in ___________________ because it loses its value whenever there is too much of it. 16. List the three (3) Functions of Money: 1______________________ 2._______________ 3. __________________ 17. A medium of exchange is something _______________________ as payment for goods and services 18. Measure of value-money serves as a ____________________ used to express the worth of something. 19. Store of value the feature of money that allows ______________________________ to be saved until needed. 20. Demand Deposit Accounts (DDA’s) or funds ____________________________ can be assessed by writing a check or using a debit card. 21. List the two (2) measures of our money supply: 1______________ 2.______________ 22. M1 is the narrow definition that includes _______________________________, demand deposit accounts, and checking accounts at depository institutions. 23. M2 is a broader measure that includes M1 along with ___________________ that serve as a store of value components including savings deposits, time deposits, and money market funds. 24. The new constitution left the printing of _____________________ to individual states. 25. Banks issued ____________________________ by printing their notes at local printing shops. 26. In the beginning, most banks printed only the __________________ they could reasonably back with the gold and silver reserves. 27. List the three (3) problems with currency: 1. ____________________________________ 2. ___________________________________________________________________ 3.___________________________________________________________________ 28. At the beginning of the Civil War, more than __________________________ were issuing more than _______________________________ of paper currency. 29. In 1863, Congress enacted the ___________________________, which created a National Banking System made up of national banks. 30. A national bank is a ____________________________ that receives its operating charter from the federal government. 31. National banks issued their own notes, called ____________________________, backed with bonds that the banks bought from the federal government. 32. In 1865, the federal government forced state banks to become part of the National Banking System by placing a ______________________ on privately issued bank notes. 33. The 10 percent tax greatly simplified the _____________________ as state banks withdrew more than 10,000 different sizes and denominations. 34. In 1863, the government issued _____________________-paper currency backed by gold on deposit with the United States Treasury. 35. In 1878, the government introduced _______________________- paper currency back by silver placed on reserve with the Treasury. 36. The Gold Standard of 1900 defined a dollar as equivalent to _______________ of an ounce of gold. 37. List the two (2) disadvantages of the Gold Standard: 1._______________________________ ______________________2.________________________________________________________________ _________ 38. List the two (2) advantages of a Gold Standard: 1. _______________________________ ___________________________________ 2._______________________________ ____________________________________________________________________ 39. In such uncertain times (like the Great Depression) people began _____________________ _________________________ for gold. 40. In 1933, President Roosevelt issued a series of orders that efficiently __________________ ____________ to the American people. 41. By 1935, U.S. citizens could no longer redeem dollars ___________________, but foreign governments were allowed to do so at the higher $35.00 an ounce price. 42. In 1913 Congress created the ________________________, now often called the “Fed,” as the nation’s central bank. 43. A central bank is a ____________________, which can lend to other banks in times of need. 44. The Fed was setup like a ______________________ when any bank joined the Fed they had to purchase shares of stock in the system. 45. The Fed’s own currency called ________________________, eventually replaced all other types of federal currency. 46. Despite the creation of the Fed, many banks were only ____________________ during the 1920’s. 47. One reason why banks were marginally sound was banks _____________________ to over _______________________in 1921. 48. By 1934, more than 10,000 banks had closed or __________________ with stronger banks. 49. If account holders became worried about their bank, they would _____________________ money before it failed-creating a bank run. 50. On March 5, 1933, President Roosevelt announced a ________________________ a brief period during which every bank in the country was required to close. 51. The Banking Act of 1933 corrected bank failures by creating _______________________ to insure customer deposits in case of a bank failure. 52. At first, the FDIC insured customer deposits up to a maximum of $2500 but today the limit is ___________________________ per bank. 53. If a bank was in danger of collapse, the FDIC could do three (3) things, list them: 1.________________________________2. _________________________________ 3.___________________________________________________________________ 54. List the two (2) reasons why banks established themselves as corporations: 1.___________________________________________________________________ 2.___________________________________________________________________ 55. To set up a state-charted bank, banks ______________________________ specifying the minimum amount of financial capital that a found must contribute. 56. Certificates of deposit or CD’s actually are not deposits but are ______________________ from a consumer to the bank. 57. When a bank receives a new deposit or CD, it must keep some of as part of the bank’s ____________________ which amounts to 20 percent. 58. ________________________ to consumers and businesses are an important part of the bank’s profit’s. 59. List the six (6) banking services most banks offer: 1. _______________________ 2. ____ ____________________________3.________________ 4._____________________ 5.___________________ 6.__________________