Name __________________________
Quiz Date / due date ______________
Money, Banking, and Finance
Principles and Practices of Economics
Chapter 10 Study Guide
Directions: Referring to your text, read pages 241-266, and answer the following
questions. Use this as a reference when studying for the chapter quiz, and be prepared to
turn it in for credit prior to taking the quiz.
Section 1:
1. Money is anything that serves as a medium of __________________, a unit of
_______________, and a store of __________________.
2. The direct exchange of one set of goods and services for another without the use of
money is known as _________________.
3. What type of economies does the barter system work well in? __________________
________________________
4. When money provides a means for comparing the value of goods and services it is
know as a unit of _________________.
5. If you choose to save your money rather than spending it, the function that money is
serving is a store of _________________.
6. When does money not function well as a store of value? _______________________
7. The term for coins and paper bills used as money is ___________________.
8. The six characteristics to determine how well an item serves as currency include:
___________________________
____________________________
___________________________
____________________________
___________________________
____________________________
9. Objects that have value in themselves that can also be used as money are known as
_______________________ ____________________
10. In what type of economies does commodity money work well? __________________
11. Our country's early money was known as representative money, which means that
the holder could exchange the money for something else of value. It was first used in
the 1600's to help finance what? _________________________________________
12. During the American Revolution, more representative money was issued to finance
the war against what country? ____________________________ The unfortunate
part about this money was that few people were able to actually collect on these bills
because the government had no power to collect taxes.
13. What year did the government set up a system to collect taxes? __________
14. When the government has decreed that money is "legal tender" and is an acceptable
means to pay debts, the money is known as _____________ money.
Section 2:
15. When did the government establish the first bank in the U.S.? __________ For how
long was its charter valid? ________ years
16. When the federal bank's charter ran out, and it was not renewed in 1811, states ran
their own banks. What was the problem with these banks?
17. When was the second bank of the U.S. chartered? __________
18. What is the name for the nations first true central bank? _________________
_________________ __________________. What year was it founded? _________
19. The severe economic decline that began in 1929 and lasted more than a decade was
known as the ______________ ____________________.
20. During this time, the combination of unpaid loans and ____________ ____________
resulted in the failure of thousands of banks across the country.
21. What is the name of the organization that insures depositors' money up to $100,000?
_________________ _________________ ________________ ________________
Section 3:
22. All the money available in the United States is known as the _______________
________________.
23. The money supply is divided into two categories, known as M1 and M2. Write what
each represents:
M1:
M2:
24. The ability to use or quickly convert assets to cash is known as __________________
25. Another term for M2 is ________________ ___________________.
26. Funds in checking accounts are also known as ______________ ________________
27. What is the possible disadvantage to saving money in a Certificate of Deposit (CD)?
28. Fractional Reserve Banking refers to a system in which banks only keep a fraction
of the funds on hand, and do what with the remainder of the money?
_____________________________
29. When a person does not pay his or her loan back, they have done what with the loan?
_______________________
30. A specific loan used to buy real estate is known as a ________________________
31. The price paid for the use of borrowed money is ____________________
32. The amount borrowed for a loan is known as the ______________________
33. When interest is paid on both the principal and accumulated interest, it is known as
what kind of interest? ___________________________
34. Why do finance companies generally charge higher rates of interest than banks or
credit unions?
35. Read the chapter summary on page 266 carefully.
Answer items 1-8 from the Key Terms activity on page 266, by writing the correct
matching term in the appropriate blanks below.
1. ___________________________________
2. ___________________________________
3. ___________________________________
4. ___________________________________
5. ___________________________________
6. ___________________________________
7. ___________________________________
8. ____________________________________