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Money
Anything that is generally accepted as a medium of exchange
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Medium of Exchange
Something that is generally accepted as payment for goods, service, and resources; the primary function of money
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Value of Money
Measured by the goods, services, and resources that money can purchase
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Barter System
System in which goods and services are exchanged for each other rather than for money
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Measure of Value
A function of money; the value of every good, service, and resource can be expressed in terms of an economy's base unit of money
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Method for Storing Wealth and Delaying Payments
A function of money; allows for saving, or storing wealth for future use, and permits credit, or delayed payments
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M1
Narrowest definition of the US money supply; includes coins and paper money in circulation, some traveler's checks, most demand deposits, and other checkable deposits
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Token Money
Money with a face value greater than the value of this commodity from which it is made
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Federal Reserve Notes
Paper money issued by the Federal Reserve Banks; includes almost all paper money in circulation
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Currency
Coins and paper money
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Demand Deposits
Checking account balances kept primarily at commercial banks
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Other Checkable Deposits
Interest-bearing accounts similar to demand deposits offered by financial institutions
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Velocity of Money
Average number of times the money supply is turned over in a year in relationship to GDP
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M2
M1 plus savings and small-denomination time deposit accounts, money market deposit accounts, and other financial instruments
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Liquidity
Ease of converting an asset to its value in cash or spendable funds
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Commodity Monetary Standard
An economy's money is backed by something of tangible value such as gold or silver
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Paper Monetary Standard
An economy's money is not backed by anything of tangible value such as gold or silver
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Financial Depository Institution
Institution that accepts and maintains deposits and makes loans; can create and destroy money
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Commercial Bank
Institution that holds and maintains checking accounts (demand deposits) for its customers, makes commercial (business) and other loans, and performs other functions
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Dual Banking System
Label given to the US banking system because both the federal and state governments have the right to charter banks
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National Bank
Commerial bank incorporated under a federal rather than a state character
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State Bank
Commercial bank incorparated under a state character
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Federal Deposit Insurance Corporation (FDIC)
Government agency established in 1933 to insure deposits in commercial banks up to a specified amount
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Asset
Something that an individual or business owns; can be used to cover liabilities
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Liability
A claim on assets; an obligation or a debt of an individual or a business
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Net Worth
Assets minus liabilities; the monetary value of a business
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Federal Reserve System
Coordinates commercial banking operations, regulates some aspects of all depository institutions, and oversees the US money supply
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Board of Governors
Seven-member board heading the Federal Reserve System; develops policies concerning money, banking, and other financial institutional practices
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Open Market Committee
Oversees the buying and selling of government securities by the Federal Reserve System
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Federal Reserve Banks
12 banks that deal with commercial banks and other financial institutions
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Reserver Account
Deposit in the name of a financial institution held at a Federal Reserve Bank or other designated place
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Correspondent Banking
Interbank relationship involving deposits and various services
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Depository Institutions Deregulation and Monetary Control Act (1980)
Legislation that increased the similarity among many financial institutions and increased the control of the Federal Reserve System
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Resolution Trust Corporation (RTC)
Federal agency created to reorganize troubled savings and loans or to deal with their affairs if they failed and closed
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Federal Savings and Loan Insurance Corporation (FSLIC)
Federal agency established in 1934 to insure deposits in savings and loan institutions; the FDIC took over many of its functions when the FSLIC was dissolved in 1989
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Money Market
An expression used to refer to corporate and government borrowing on a very short-term basis
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Mutual Fund
Pool of money form depositors that is used to make investments
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Garn-St. Germain Act (1982)
Strengthened the deregulatory trend begun by the Monetary Control Act of 1980
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Riegle-Neal Interstate Banking and Branching Efficiency Act (1994)
Allows banking organizations from one state to open or acquire banks, and to open branches, in other states
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Gramm-Leach-Billey Act (Financial Services Modernization Act) (1999)
Allows bank holding companies that meet vertain standards to become financial holding companies
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Interstate Banking
The performance of services in more than one state by a single banking organization
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Unit Banking
Operation of one bank with no branches
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Bank Holding Company
Corporation formed for the purpose of owning, or holding, controlling shares of stock in a bank, or banks
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Financial Holding Company
A holding company that can engage in banking, securities, insurance and other financial activities
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Branch Banking
Operation of more than one facility by a bank to perform its functions
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