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.__________________