Interest
The calculation of interest on reinvested interest compounded with the original principle.
Why is it important to grow your savings?
In order to increase the amount in your savings.
How do Financial institutions creat money?
By lending out money and collecting interest
What do we call the central bank of the US?
The Federal Reserve Bank
Which financial institutions are required to abide by the regulations set by the Federal Reserve?
All Financial Institutions
What does it mean when your rate is expressed in annual and monthly terms?
It means that it is calculated and added to your account once a year and 12 times a year.
What economic force could keep savings from being profitable?
Inflation
Name 2 of the 3 organizations that creat money in the US.
1. US Treasury
2. Financial institutions
3. Federal Reserve
How many Federal Reserve Districts exist in the US?
12 Districts
Who appoints members of the Federal Reserve Board of Governors?
The President appoint them and Congress must approve.
How often is simple interest calculated?
Once at the end of the year.
How do you calculate the amount your savings would increase after one year?
Multiply your deposit by the interest rate as a decimal.
Would the Fed buy or sell government bonds if they wanted to decrease the amount of money in circulation?
They would sell bonds.
Who was the President when the Federal Reserve was established?
Woodrow Wilson
What is the “money multiplier effect?”
The expansion of the money supply as a result of commercial banks lending their depositors’ money.
What is the name of the interest rate which financial institutions will pay for you deposit?
Nominal interest rate
Why is it a good idea to put money in savings instead of investing in stocks or bonds?
Because it is much safer and doesn’t involve risk
How does the US Treasury create money?
By minting and selling coins to the Federal Reserve
When was the Federal Reserve established?
1913
What is the formula for calculating the increase of a savings account over a long period of time?
Initial investment (1+r)^time/how often it‘s compounded
How does the size of a deposit impact the interest rate?
The higher a deposit is the higher the nominal rate in which an institute will pay and vice versa.
What are the 2 key factors in how much your savings will ultimately earn?
1. The amount in the initial deposit
2. The length of time in which the money is kept in deposit
What are 3 of the 6 national economic services provided by the Federal Reserve System?
Provide uniform currency, regulate member banks, clear checks and debit card transactions, act as the nation’s fiscal agent, serves as the bankers’ bank, to create money
Who prints the Federal Reserve notes in the US?
The Bureau of engraving and Printing (BEP)
What are the Escheat Laws?
These dictate that if an account is left dormant for a period of time (usually 5 yrs.) the funds must be turned over to the state.