DSST Money & Banking Questions and Answers Solved 100% Correct!!

Fiat Money - Answer-Money that isn't tied to reserves such as gold, rather is guaranteed by the government's trustworthiness. Has no intrinsic value. Exists in currency bills form and bank deposits. M1 - Answer-The sum of all money held by businesses and individuals (incl. traveler's checks) and checkable deposits. M2 - Answer-The category that contains all funds included in M1, as well as savings deposits, smalltime deposits, money market funds, and other deposits. M3 - Answer-The classification of money that includes M2 as well as long-term repurchase agreements held by banks. Fannie Mae - Answer-The mortgage association that mostly buys mortgages from banks to free up capital. Ginnie Mae - Answer-The government association that guarantees high-risk mortgages. Freddie Mac - Answer-The Corporation that uses global capital markets to provide support for lowcost mortgages. Credit Union - Answer-This institution mainly makes consumer loans and accepts savings deposits. Usually owned by a group or employees of a firm. Members basically loan money to one another. Interest are low, usually used for emergencies by its members. Mutual fund - Answer-These companies start funds that they sell to investors. Deposit Monetary Control Act 1980 - Answer-This deregulation act was created to counter the trend of disintermediation. Established the FDIC. FDIC 1991 - Answer-This act improved the FDIC (established by Deposit Monetary Control Act in 1980), by safeguarding consumers more who were weary of the banks after the crisis of the late 1980s.Demand deposits - Answer-These deposits can be withdrawn immediately at the discretion of the depositor (e.g. checking account). Do not bear interest. M1 includes these deposits. Money Market Funds - Answer-An institution that sells shares and uses the money from the sale to purchase assets. The value of these funds is included in the M2 definition of money. Federal Reserve (/Central Bank System) - Answer-The National Monetary Commission established this system in 1908 to investigate the country's monetary policy. The members on the Board of Governors serve 14-year terms. The advisory council has 12 members (one from each district) and each serve 3 one-year terms. Stagflation - Answer-This occurs when very little economic growth and rising inflation is happening. During such periods, output stalls and unemployment is high.