ECONOMICS
GUIDED READING
CHAPTER 10: “Money and Banking”
Section 1 “Money” pg. 243-248
1. What are the three functions of money?
A. _____
B. _____
C. _____
2. What is money? _____
_____
3. What is barter? _____
_____
4. Define:
A. medium of exchange _____
_____
B. unit of account (value) _____
_____
C. store of value _____
_____
D. currency _____
_____
5. To be successful as a medium of exchange money must meet (6) six characteristics.
List them:
A. _____
B. _____
C. _____
D. _____
E. _____
F. _____
6. What is commodity money (A)? Give an example (B):
A. ______
B. ______
7. What are (2) two disadvantages of commodity money?
A.
B.
8. Define representative money and give an example:
9. Define fiat money
10. Why did “Continentals” become worthless?
11. Why does US currency have value?
Section 2 “The History of American Banking” Pg. 250-256
1. Define:
A. Bank
B. National bank
C. Greenback
D. Bank run
E. Gold standard
2. Why did the Federalist, led by
believe that the country needed a strong “central bank”?
3. The first centralized bank in America established by the Federalists was called
4. Did it succeed in bringing order and stability to American banking?
When did it cease to exist? Why?
5. Why was the Second Bank of the U.S. established( A )? In what year ( B)?
A. ______
B. ______
6. During the “Free Banking Era” who issued their own currency?
7. Name four (4) problems that arose from the Free Banking era (Wildcat)
A.
B.
C.
D.
8. What was the currency called that was issued by the US Treasury in 1861?
9. The National Banking Act in 1863 & 1864 gave the Federal Govt. (3) three important
powers, what were they?
A.
B.
C.
10. What were (2) two advantages of the “gold standard”?
A.
B.
11. As a result of the 1907 banking crisis the govt. made plans to reinstate a central bank. It
would be called the
12. The “Federal Reserve System” created regional banks all
by the federal govt.
13. The Federal Reserve Banks were the banks for their 12 regional districts.
14. stored some of their cash reserves at the Federal Reserve
Bank in their district.
15. All the Federal Reserve Banks were supervised by a
appointed by the President of the US.
16. Each of the (12) twelve regional banks allowed member banks to borrow money to meet
Their demands.
17. The system also created the national currency we use today. They are called
;
18. This allowed the “Fed” to or the money in
circulation according to business needs.
19. List (3 ) three factors that contributed to the beginning of the Great Depression:
A.
B.
C.
20 Why was the FDIC created?
21. By the 1970’s and 1980’s the banking industry was ready for less govt. restrictions.
Unfortunately, the deregulation lead to a crisis in what industry(A) and why(B)?
A. ______
B.
22. List the (3) three main reasons for the S&L crisis.
A.
B.
C.
23. What was the name of the Act passed by Congress in 1989 to abolish the independence of
the S&L industry?
24. In the 1990’s banks begin to and sell stocks and bonds.
Section 3 “Banking Today” pg. 258-264
1. Define:
A. Money supply
1. M1
2. M2
B. Liquidity
C. Demand deposit
D. Money Market Mutual funds
E. Fractional reserve banking
F. Default ______
G. Mortgage
H. Credit card
______
I. Interest
J. Principle
K. Debit card
L. Creditor
2. What is the difference between M1 and M2 (A)? Give an example of each (B):
A.
B.
3. List and describe (5) five types of Financial Institutions:
A.
B.
C.
D. ______
______
E. ______
______
4. List (5) five functions (services) that Financial Institutions perform:
A.
B.
C.
D.
E.
5. Explain why banks must balance profit and security when making loans.
6. Name 3 transactions that you can complete at an ATM.
A.
B.
C.
7. How does a debit card differ from a credit card?
4