Economics Flashcard Lesson 3 Money and Banking

Front

What are the three functions of money?

Back

Medium of exchange, store of value, unit of account

Front

What is money?

Back

Something that people will accept as payment for goods and services

Front

What are the main functions of banks? Options: Store money, earn money, borrow money; Trade goods and services, measure costs, earn income; Invest money, save money, lend money; Buy money, sell money, charge interest

Back

Store money, earn money, borrow money

Front

What is savings?

Back

Income not spent on immediate wants

Front

What is the function of money that allows people to measure the relative costs of goods and services?

Back

Unit of account

Front

How do banks earn money?

Back

By charging interest or fees for their services

Front

What are common options for saving money? Options: Savings accounts, certificates of deposit (CDs), stocks, Interest rate, assets, income, Barter, trade, investment, Inflation, stocks, borrowing

Back

Savings accounts, certificates of deposit (CDs), stocks

Front

What happens to a stock owner if the stock price increases?

Back

They make money.

Front

Why might a person invest in CDs rather than savings?

Back

CDs offer a higher interest rate

Front

Why are the interest rates not the same for borrowing and lending?

Back

Banks charge a higher interest rate for loans than they pay for savings accounts.