Session:15 Understanding Money and Financial Institutions
Key Terms
Introduction to Business | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/introduction-business
- bank charter
- An operating license issued to a bank by the federal government or a state government; required for a commercial bank to do business.
- commercial banks
- Profit-oriented financial institutions that accept deposits, make business and consumer loans, invest in government and corporate securities, and provide other financial services.
- credit unions
- Not-for-profit, member-owned financial cooperatives.
- currency
- Cash held in the form of coins and paper money.
- demand deposits
- Money kept in checking accounts that can be withdrawn by depositors on demand.
- discount rate
- The interest rate that the Federal Reserve charges its member banks.
- Federal Deposit Insurance Corporation (FDIC)
- An independent, quasi-public corporation backed by the full faith and credit of the U.S. government that insures deposits in commercial banks and thrift institutions for up to a ceiling of $250,000 per account.
- Federal Reserve System (Fed)
- The central bank of the United States; consists of 12 district banks, each located in a major U.S. city.
- financial intermediation
- The process in which financial institutions act as intermediaries between the suppliers and demanders of funds.
- M1
- The total amount of readily available money in the system; includes currency and demand deposits.
- M2
- A term used by economists to describe the U.S. monetary supply. Includes all M1 monies plus time deposits and other money that is not immediately accessible.
- money
- Anything that is acceptable as payment for goods and services.
- open market operations
- The purchase or sale of U.S. government bonds by the Federal Reserve to stimulate or slow down the economy.
- pension funds
- Large pools of money set aside by corporations, unions, and governments for later use in paying retirement benefits to their employees or members.
- reserve requirement
- Requires banks that are members of the Federal Reserve System to hold some of their deposits in cash in their vaults or in an account at a district bank.
- selective credit controls
- The power of the Federal Reserve to control consumer credit rules and margin requirements.
- thrift institutions
- Depository institutions formed specifically to encourage household saving and to make home mortgage loans.
- time deposits
- Deposits at a bank or other financial institution that pay interest but cannot be withdrawn on demand.