Topic 6: Money, Banking Financial Markets
Two of the three functions of money
What are medium of exchange, store of value, or unit of account? (any 2)
This erodes purchasing power
What is inflation?
Document that gives Congress the authority to levy taxes
What is the Constitution?
The U.S. central bank
What is the Federal Reserve?
When the value of a nation's imports exceeds the value of its imports
What is a trade deficit?
Money that has value because the government says it does.
What is fiat money, or legal tender?
The three main measures of the whole economy
What are GDP, the unemployment rate, and the inflation rate?
Ppeople with higher incomes pay a higher tax rate
What is a progressive tax?
The total amount the U.S. government owes its bondholders
What is the national debt?
When a nation can produce a good at a lower opportunity cost, it holds this
What is the comparative advantage?
Spreading out your investments to reduce risk
What is diversification?
Two of the three types of unemployment
What are frictional, structural, and cyclical unemployment? (any 2)
Two of the three major federal entitlement programs
What are Medicare, Social Security, and Medicaid? (any 2)
When the Fed changes the money supply, it affects the cost of borrowing, known as this
What is the interest rate?
A tax on imports
What is a tariff?
Mutual funds, pension funds, life insurance companies
What are financial intermediaries?
The key word for economic growth
What is PRODUCTIVITY?
Source of about half of federal revenue
What is the individual income tax?
One of the tools of expansionary fiscal policy
What is increase government spending or decrease taxes? (either one)
The practice of using trade barriers to protect domestic industries from foreign competition
What is protectionism?
A bank keeps part of customer deposits in its vault and lends the rest.
What is fractional-reserve banking?
The process of increasing the amount of capital per worker
What is capital deepening?
Spending authorized by Congress through appropriations
What is discretionary spending?
One of the Fed's three policy tools
What is the reserve requirement, the discount rate, or open market operations? (any 1)
The lowering or elimination of trade barriers between nations is part of pursuing this
What is free trade?