BUS 410 ALL SET QUESTIONS AND ANSWERS SET
A+
✔✔PPN - CLEARING - ✔✔- Merchant submits all the approved transactions to the
merchant bank
- Sends these to card network
- Card network validates the transactions
- Forwards transactions to the customer banks
- Prepares to transfer funds
✔✔PPN - SETTLEMENT - ✔✔- Card network calculates the net settlement position for
all the banks
- Customer bank withdraws funds; the Card network deducts their fees
- Merchant bank deposits the funds
- Merchant receives the payment
✔✔Tokenization - ✔✔The process of replacing sensitive data with unique identification
symbols that retain all the essential information about the data without compromising its
security.
✔✔Distributed Ledger Technology - ✔✔A shared transaction ledger with copies stored
across multiple network participants.
✔✔Consensus mechanism - ✔✔The rules participants use to agree that a transaction is
valid before updating the ledger.
✔✔DLT transaction process - ✔✔Transaction submitted → nodes validate →
consensus reached → ledgers updated → transaction completed.
✔✔Why do we need money - ✔✔- convenience of exchange
- allows savings
- common measure of value
, ✔✔barter economy - ✔✔direct exchange of goods (inefficient)
✔✔Commodity monies - ✔✔widely accepted, but difficult to transport and divide with a
limited supply
✔✔Representative Monies - ✔✔Paper claims are backed by a commodity like gold.
✔✔Role of banks back then - ✔✔- Stored gold
- Facilitated physical payments
- Began the process of lending gold out
✔✔Fractional Reverse Banking - ✔✔- Banks keep a fraction of the reserves
- Lend out the remaining funds
- The loaned-out money is deposited and spent, increasing the overall money supply
A 1000 deposit at a 10% reserve rate: 900 will be lent out, which will then be deposited,
which will be lent out ($810) to the point where 1000 can turn into 10,000 of money.
✔✔Outside money - ✔✔money created by the state or the central bank
✔✔inside money - ✔✔money created with bank deposits
✔✔Why did we need a central bank - ✔✔- avoid bank runs
- provide stability in supervising the banking system
- acting as the lender of last resort
✔✔The gold standard - ✔✔A monetary system in which paper money and coins are
equal to the value of a certain amount of gold.
Many currencies were pegged to gold, which made exchange between countries quite
stable
✔✔Problems with the gold standard - ✔✔-money supply cannot be adjusted in
response to economic conditions
-all countries maintain fixed rates
-the effects of bad policies in one country can be transmitted to other countries
✔✔transition to fiat currency - ✔✔- CB adjustments to the interest rates
- Stronger gov intervention
✔✔Problems with fiat currency - ✔✔inflation
-- money supply increasing quicker than supply of goods
-- more consumer spending and borrowing
A+
✔✔PPN - CLEARING - ✔✔- Merchant submits all the approved transactions to the
merchant bank
- Sends these to card network
- Card network validates the transactions
- Forwards transactions to the customer banks
- Prepares to transfer funds
✔✔PPN - SETTLEMENT - ✔✔- Card network calculates the net settlement position for
all the banks
- Customer bank withdraws funds; the Card network deducts their fees
- Merchant bank deposits the funds
- Merchant receives the payment
✔✔Tokenization - ✔✔The process of replacing sensitive data with unique identification
symbols that retain all the essential information about the data without compromising its
security.
✔✔Distributed Ledger Technology - ✔✔A shared transaction ledger with copies stored
across multiple network participants.
✔✔Consensus mechanism - ✔✔The rules participants use to agree that a transaction is
valid before updating the ledger.
✔✔DLT transaction process - ✔✔Transaction submitted → nodes validate →
consensus reached → ledgers updated → transaction completed.
✔✔Why do we need money - ✔✔- convenience of exchange
- allows savings
- common measure of value
, ✔✔barter economy - ✔✔direct exchange of goods (inefficient)
✔✔Commodity monies - ✔✔widely accepted, but difficult to transport and divide with a
limited supply
✔✔Representative Monies - ✔✔Paper claims are backed by a commodity like gold.
✔✔Role of banks back then - ✔✔- Stored gold
- Facilitated physical payments
- Began the process of lending gold out
✔✔Fractional Reverse Banking - ✔✔- Banks keep a fraction of the reserves
- Lend out the remaining funds
- The loaned-out money is deposited and spent, increasing the overall money supply
A 1000 deposit at a 10% reserve rate: 900 will be lent out, which will then be deposited,
which will be lent out ($810) to the point where 1000 can turn into 10,000 of money.
✔✔Outside money - ✔✔money created by the state or the central bank
✔✔inside money - ✔✔money created with bank deposits
✔✔Why did we need a central bank - ✔✔- avoid bank runs
- provide stability in supervising the banking system
- acting as the lender of last resort
✔✔The gold standard - ✔✔A monetary system in which paper money and coins are
equal to the value of a certain amount of gold.
Many currencies were pegged to gold, which made exchange between countries quite
stable
✔✔Problems with the gold standard - ✔✔-money supply cannot be adjusted in
response to economic conditions
-all countries maintain fixed rates
-the effects of bad policies in one country can be transmitted to other countries
✔✔transition to fiat currency - ✔✔- CB adjustments to the interest rates
- Stronger gov intervention
✔✔Problems with fiat currency - ✔✔inflation
-- money supply increasing quicker than supply of goods
-- more consumer spending and borrowing
