1.

part 1. The financial system

1.1
charter 1.1 the financial system and functions
1.2
charter 1.2 the nature of money
1.3
charter 1.3 financial intermediation
1.4
charter 1.4 the payment

2.
part 2 the financial institution

2.1
charter 2.1 the banking institution
2.2
charter 2.2 the nonbank financial institution

3.
part 3. The financial market

3.1
charter 3.1 the asset market
3.2
charter 3.2 the money market
3.3
charter 3.3 the foreign exchange market

3.4
charter 3.4 the traditional market

4. ,
part 4 the money supply, monetary policy

4.1
charter 4.1 the money supply
4.2
charter 4.2 the process of money increasement
4.3
charter 4.3 the money and total economy
4.4
charter 4.4 monetary policy
 1.

part 1 The financial system

1.1.

charter 1.1 The financial system and functions

The economic monetary

relationship of
contributing and using
the money and the fund
1. Finance of money



2. Financial system The merge of financial
, institution and financial
market

3. Financial institution Financial negotiator

4. Financial market




The lawful profit
,
organization that

deposits others money
,
and lends money under

its name and performs
,
transaction between the

parties


.
5. Central bank A government bank fo

bank generally

responsible for national
.
monetary policy
6. Commercial bank Financial negotiator

7. Nonbank financial Financial negotiator
institution

8. Financial company The financial company
depostits large amount
of money and distributes
to small customers.

.

Insurance company The insurance company

collects charge and fees
 from insurers and refund
or repay the certain
amount of insured assets
9 if accident occurs.




.

The retirement fund The one kind of financial

intermediaries. The
. closely operates with
10 , government agencies.

.

Collects large amount of

money from small
11 The investment fund investors and spends it.


.
This institution mainly
12 deposits money and
lends money
.
An interest-bearing
13 relationship used by a
Savings and loan customer to accumulate
association (S&L) . funds. Savings accounts
have no fixed maturity
date
.
concerning spending
Fiscal policy and taxation.
14. Government policy
.

2 .2
charter 2.2 money function

,

Money Legal tender; coin and
currency declared by a ,
1. government to be the
accepted medium of
exchange ,
,

Paper money as , .
Currency
2. opposed to coin
Counterfeit money Spurious ( bogus) ,
3. coins and currency ,
that have been made
to appear genuine
 ,
Metallic money in ,
4. Coin contrast to paper .
money / currency /

The direct physical

exchange of
merchandise, not

5. accompanied by an
Barter
exchange of money.

Government-backed

currency that is
,
Legal tender acceptable in payment
6.
of all private and public

debts


7. M1 M1 Money supply
A definition of Money 1 +
8. 2 2 supply that adds to M1
such assets as saving
accouts small- de-
nomination time
deposits money
market deposit
accounts and money
market mutual fund
sharis
Money supply that 2 +
adds to M1 such and
9. 3 3 M2 such assets as
large- denomination
time deposits
Ability to cknvert an
10. liguidity asset into cash guickly
with little loss in value

1. 3
charter 1.3 Financial intermediation

,

Indirect finance, in
1. Financial which savers place
intermediation funds with financial
intermediaries that in
turn lend to ultimate .
borrowers.
 1.4
charter 1.4 Payment

A piastic card enabling
the cardholder to
purchase good or
services the cost of which

1. is immediately charged to

his or her bank account.
,
Debit cards are used to
,
Debit card activate point of sale

terminals in
.
supermarkets, gas

stations, and stores.

Together with credit
cards, they are commonly
referred to simply as bank
cards.
A plastic card ( or its

eguivalent ) to be used
,
from time to by the

cardholder to obtain

money good or services

possible under a line of

credit established by the

2. Credit card card issuer The

cardholder is billed for
.
any outstanding balance
An interbank transmittal
form, resembling a

deposit slip, used to

3. accompany cash items
Cash Letter
sent from one bank to
another.

Equipment capable of

automatically delivering

4. Cash dispenser amounts of cash to a

customer, usually upon

insertion of a bank card.
To give money in
exchange for a check

5. drawn an another
Cash a chek
financial institution.

A document issued by a
transporter of goods
(carier) covering a
shipment of merchandise. .
It may be negotiable or ,
6. Bill of lading- non negotiable form and
is a contract to ship the
merchandise. A receipt for .
it, and a document of
legal title.

Bilateral contract An agreement

7. .

,
The party who is to
T
receive the proceeds of a
8.
Beneficiary trust, insurance policy,
.
letter of credit, or other
transaction.

A check drawn by a bank

on its account with
9. Bank draft
another bank.
.

A check, also known as
10. cashiers, treasurers, or ,
official check, drawn by a ,
bank on itself. Since the ,
drawer and drawee are
one and the same, .
Bank check
acceptance is considered ,
automatic and such
instruments have been
legally held to be
promises to pay.
.

: A negotiable instrument
sold by a bank or other
issuer in various
denotations for the
convenience of
11. Traveler's check individuals who do not
wish to carry cash. These .
checks are readily
convertible into cash upon
proper identification,
usually by a signature in
the presence of the
cashing party.
.

Any item that a bank :

Transit check chooses to classify as not
12. payable locally; an out-of-
town check ,



A demand draft, drawn on

a bank, on which the
13. Forged check
drawer's signature is not

genuine


A service by which a bank
Automat transfer moves funds from one

14. service- type of account to another

for its customer on a 1

preauthorized basis.

 Electronic facilities,
located inside or apart
from a
financial services
Automated teller
15. institution, for handing
machines (ATMs)
many customer
transactions
automatically. .

Automated teller a card operated facility

16. for making bank deposits
machine /
and withdrawals
ATM / .
Automated clearing an electronic system for
making regular payments
house /ACH/
17. of receiving regular
credits .

SWIFT Society for A telecommunications

18. Worldwide interbank system that transfers
Financial funds between banks
Telecommunications internatiolally
(SWIFT)

A commercial bill for

Invoice goods sold or services
19.
rendered


A document, issued by an

insurer, providing a
20.
Insurance certificate degree of protection for

merchandise during

transit


Ownership interest,
represented by
stockholders' investment
Equity
21. and retained earnings; the
excess of a firm's assets
over its liabilities


The party who issues a

set of written instructions
22. Drawer
to a drawee, calling for a

payment of funds



The party to whom the
drawer issues instructions
to make payment. In the
Drawee
23. case of checks, the .
drawee is a bank or other
financial institution
,

Draft A signed, written order by
which one party (the
drawer) instructs another
(the drawee) to make
payment to a third (the ,
payee). In international
24. .

banking, a draft is often
called a bill of exchange



A written order to pay,
accompanied by
Documentary draft securities or other papers
25. to be delivered against
payment or acceptance

26. Order
Any item that a bank :
Transit check chooses to classify as not
27. payable locally; an out-of-
town check ,


The holding of property by 2
two or more persons in
such a way that each has
an undivided interest that,
28. : Terminal at the death of one,
passes to the heirs or
devisees and not an not
to the survivor(s)


An instrument, issued by
a bank, by which the .
bank's credit is
substituted for that of an
individual or corporation.
Sight letter of credit In merchandise
shipments, a sight letter
29. of credit permits payment
of the funds immediately
upon presentation of the .
documents evidencing the
shipments.
.
A written order to pay
upon presentation or
30. Sight draft delivery

A person who creates a
trust (such as a living . ,
31. Settlor trust) to become operative ,
during his/her lifetime.
Also called grantor, .
trustor, or donor
Letter of credit A bank instrument
substituting the credit of
the issuing bank for the
credit of another party,
such as an importer of
merchandis

32.






A term usually associated
with letters of credit. It
allows the letter of credit
to be canceled or .
33. Revocabl e amended by either party
without the approval of
the other.

.

The term used to describe
a letter of credit that ,
cannot be amended or
Irrevocable
34. canceled, except by full
mutual agreement
between the parties


A bank that has received
notification from another
financial institution of the
opening of a letter of .
35. credit. This advising bank
Advising bank
then
contacts the beneficiary,
reaffirming the terms &
conditions of the letter of
credit
.
A bank that issues a letter
36. Issuing bank of credit based on the
application of a customer
A document issued to

certify the country of

37. origin of goods or
Certificate of origin .
merchandise.

A document issued by an
appraiser and attesting
Certificate of quality that goods being shipped

38. conform to the buyers
specifications. .
 2
Part 2 financial institution

2.1
charter 2.1 banking institution

A commercial bank operating
under a federal charter and ,
supervised and examined by the
Comptroller of the Currency. The .
National bank word national must appear in some
form in the banks corporate title.
All national banks must belong to .
1. the Federal Reserve System and
FDIC. FDIC- .
A government bank fo bank
Central bank generally responsible for national
2. monetary policy .
3. Real estate credit, usually
Mortgage loan extended on a long-term basis with
the property as security. .

A negative (minus) balance in an

account, resulting from the paying
4. ( Overdraft
of checks for an amount greater
)
than the depositors balance.

An advance of cash merchandise
or other commodity in exchange ,
Credit
for apromise or other agreement to
5. pay at a future date with interest if ,
so agreed

A party to whom money is owed by
Creditor
another
6.


Credit risk The possibility that a debtor may
.
not be able to repay
7.

Interest Money paid for the use of money
8.
Any placement of cash checks or
Deposit
9. other drafts with a bank for creit to

an account
A bank that maintains an account .

Correspondent relationship and / or engages in an ,
/
10. bank exchange of services with another .
/
bank
Mhe process or methed by which
checks ahd / or other point- of- ,
sele mransactions are moved
Clearing physicaiiy or electronicalle from the , .
11. point or origin to a bank or order
financial institution that maintains
the customers account number
Automat A computerized facility that
clearing house perfoms the clearing of paperless ,
(electronic) entries between

12.
member financial institutions.
.

CHIPS (Clearing
Aprivate telecommunications
House Interbank
service operated through the New
13. Payment
York Clearing House for settlement
System .
among participgting banks
A bank that maintains a head office
Branch bank and one or more branches is
14. subject to state law.
A report, rendered by a bank to a
15. customer, showing the account
Bank statement balance at the start of a period, the
transactions affecting the closing .
balance
A corporation that owns, controls,

or otherwise has the power to vote
Bank holding
16. at least 25 percent of the voting
company 25%-
stock in one or more banks.
.
The individuals elected by the

banks stockholders to constitute

the board of directors and who
Bank directors
17. form the active, governing body of
.
the bank as a corporation.

A detailed listing of assets,

liabilities, and capital accounts (net

worth), showing the financial
, ,
condition of a bank or company as

of a given date. A balance sheet
Balance sheet .
illustrates the basis accounting
18. =
equation: assets= liabilities + net
+
worth.In banking, the balance
.
sheet is usually referred to as the
statement of condition
The signature of those parties who
Authorized have the legal right to issue
19. signature instructions regarding an account. .

,
A computerized facility that
Automat perfoms the clearing of paperless
20. clearing house (electronic) entries between
member financial institutions.
.

In banking, an individual, usually
appointed by the banks directors
and reporting directly to them, who .
Auditor
is responsible for examining any
21. and all phases of the banks
operations. .

Audit - A formal or official examination and

22. verification of account
 Anything owned that has

commercial or exchange value.
.
23. Assets may consist of specific
Asset- ,
property or of claims against
.
others, in contrast to obligations
due to others

A record of the income and
Income expenses of a bank or business

statement covering a period of time. It is also
24. called a profit and loss statement . ,

A written acknowledgment by a
bank of a transaction affecting an
1Advice-
account; for example, debit or . ,
25. credit advices. .

Amounts due to a bank or

business for merchandise sold on

Account credit or for services rendered.
.
receivable- Accounts receivable are short-term
28.
assets
.

The portion of banks' demand and

time deposit? that must be kept in

Legal reserves the form of cash or acceptable

equivalents for depositors'
29.
protection

.

Intentional misrepresentation of a ,
material fact by one party so that
Fraud
another party, acting on it, will part
30. with property or surrender a right

1913

The organization created by the 12
Federal Reserve Act in 1913, ,
consisting of the 12 district banks , ,
and their branches plus the
Federal member banks, who are the legal
Reserve System owners. The Fed Board of .
Governors, headquartered in
31. Washington, exercises overall
control over the nationwide
operations of the System


Federal Reserve The paper money issued by any 12
notes one of the 12 Federal Reserve
banks and officially designated by
the federal government as legal
tender. Each such note is an
interest-free promise to pay on d
emand .

32.


The 12 district institutions that deal
12
with member banks and the
Federal .
government. The district banks
Reserve banks
maintain branches and check
,
processing centers as necessary
33.

A financial firm that purchases at a
,
discount the accounts receivable

Factor of other firms and assumes the

risks and responsibilities of

collection
34.
,
Deposits that are denominated in
Eurodollars dollars but held in foreign branches
35. or banks ,


The holding of funds, documents,

securities, or other property by an
, ,
impartial third party for the other

Escrow two participants in a business
.
transaction. When the transaction

is completed, the escrow agent
36.
releases the entrusted property


Ownership interest, represented by

stockholders' investment and
Equity
retained earnings; the excess of a

firm's assets over its liabilities
37.
Overdraft A negative (minus) balance in an
/ account, resulting from the paying
38. of checks for an amount greater
than the depositors balance.

Market risk The possibility of decline in the
current value of a security; the loss ;

39. that the holder of an investment
may have to assume at the time of
sale.
The quality that makes an asset
quickly and easily convertible into
cash; also, the ability of a bank, ;
40. Liquidity business or individual to meet ,
current debts.
.
Anything owed by a bank, ,
individual, or business. A banks

Liability largest liability is the sum total of .
41. its deposits.

.
situation in which a bank goes out
of business because it can not
meet its obligations. See
42. Bank failure assumption method and payoff . /
method /

a summary statement of an
individuals or a businesss financial
43. condition on a given date
Balance sheet
an item owned that has a value, 2
an item on a balance sheet
showing the value of property
44. Asset owned or receivable ,

The market in which an asset is
World Bank traded for immediate delivery also .
(International called the cash market as
45. bank for opposed to a market for forward
Reconstruction or future delivery .
and
Development)
Savings bank A financial institution that
traditionally was limited to
46. accepting savings deposits and
making home mortgage loans

Retained Profits of a corporation that are

47. earnings not distributed as dividends to
shareholders

Reserves Funds that a bank holds in the

from of vault cash or deposits at
48. the Federal Reserve

International A domestic branch bank
49. IBF- Banking Facility established for international
- (IBF banking and treated for regulatory
purposes as a foreign branch.
rate ,

50. .
Income A summary statement of an
statement individuals or a businesss current
receipts and current expenditures
51. during a period of time. ,
.
The interest rate in terms of goods
Real interest and services; approximated by /
52. rate substracting the rate of inflation /
from the nominal interest rate
A loan that allows the lender to
make periodic adjustments in the
53. Variable rate interest rate, according to .
loan fluctuating market conditions. Also
referred to as an adjustable rate .
loan.
An extension of credit with a :
specific repayment date.
54. Time loan

Time letter of A letter of credit containing a

credit specific maturity date for payment.
55.

: Time deposit An account which carries a specific

maturity date, with limitations on
56. withdrawals before that date.

 Tenants in The holding of property by two or 2
: common more persons in such a way that
each has an undivided interest
that, at the death of one, passes to
57. the heirs or devisees and not an
not to the survivor(s)

A savings account in which a
58. Statement periodic statement replaces the
savings passbook
.
A commercial bank chartered by
State bank the state in which it is
59. headquartered.
Service charge A fee levied by a bank for services
60. rendered.
Savings An interest-bearing relationship
account used by a customer to accumulate
61. funds. Savings accounts have no .
fixed maturity date.
.
The ideal perception by customers
that the bank is in a position to
honor all anticipated demands for
withdrawals of funds and that the
62. Safety bank has taken all appropriate
measures to provide full protection
for all property entrusted to it.
Reserves Portions of a bank's funds set
aside to meet legal requirements
63. and/or for known or potential
expenses or losses.
.
Receiving teller A bank representative who accepts ,
and verifies deposits and issues
receipts for them, but has no
64. paying or cashing duties. .
,

.
 2.1
charter 2.1 nonbanking financial institution

A voluntary cooperative
association of individuals
having some common .
bond ( for example place ,

1. Credit union of employment) ,

organized to accept
deposits extend loan and .
provide otder financial
services
Pension trust A trust fund established
2. by an employer (usually
a corporation) to provide
benefits for incapacitated
or retired employees,
with or without their
contributions


.
Living trust A trust fund that becomes
effective during the

3. lifetime of the trustor
(settlor). .
The relationship that
traditionally was limited
to accepting savings
4. , Savings and loan deposets, usually as
association (S&L) shares, and making
home mortgage loans

A financial institution
providing protection
against loss (of life or -
5. Insurance property) or costs (such
company as medical or legal costs)
by accepting payments .
(premiums) in return for a
guarantee of
compensation.
The broad term used to
describe savings and
loan associations, whose
6. Thrift institution primary function is ,
: accepting deposits and
granting mortgage loans. ,

A thrift institution
specializing in savings
accounts but also offering
other forms of deposit
relationships, including
7. Savings bank checking accounts. See
also mutual savings
 bank. Many savings
banks have become
federally chartered,
rather that state
chartered.
A federally chartered or
state or state chartered
thrift institution that
accepts various types of
deposits and uses them .
8. Savings and loan primarily for mortgage
association (S&L) loans. By making -
deposits, the members of
a cooperative S&L are
actually buying stock in it.
A fund that pools the
investment of a large
number of shareholders
and purchases securities
9. Mutual fund such as stocks or in
money market mutual
fund money market
instruments
.

3.
part . financial market

3.1
charter 3.1 capital market

Certificates evidencing
ownership of a corporation
and generally giving the ,
stockholder voting rights
1. Common stock Common stockholders
have rights inferior to those ,
who hold the corporation s .
bond preferred stock and
other debts
Preferred stock Securities that give the
holder a right to share in a
banks or corporations
profits before common
shareholders. If the
institution is liquidated, .
preferred stockholders
have a prior claim on its
2. assets over common
stockholders and certain
other creditors. Preferred
stock usually does not give
 .

the holder voting


Interest withheld when a
note draft or bill is ,
Discount
3. purchased or collected in
advance at the time a loan
is made
One of a series of
promissory notes of
consecntive maturimies
attavhed to bond or other ,
/
Coupon debt certificate and .

4. intended to be detached
and presented on their .
respective due dates for
payment of interest

A bisiness organization
.
treated as a legal entity

and owner by a group of
5.
stockholders The
.
Corporation stockholders

( shareholders ) elect the

directors who will manage

the affairs of the

corporation

Usually synonymous with
common stock; the total
amount of shares of
Capital stock - ownership in corporation.

6. The total amount of

corporations common and .
preferred stock is
authorized by its charter or
certificate of incorporation
An accounting term
describing the excess of

assets over liabilities.
.
7. Capital accounts include
,
Capital money raised through the

sale of stock, retained

earnings, and borrowings
in the form of notes or
debentures.

A writing instrument issued
8. o Bond of .
to protect a party against
indemnity
loss
An instrument that
Bond evidences long-term debt. c
The issuer (a corporation, . /
unit of government, or ,
other legal entity ) ,
promises to repay the /
9. stated principal at a
specified date. Bonds may
be registered(identifying .
the holder ) or bearer (not
identifying the holder).
.
 Money; paper currency
.
Bill
10.

The exchange of money,

either for a promise to pay

at a later date (as with
Investment
11. bonds) or for an ownership

share in a business (as

with stocks)

The most common method

of expressing a company's
.
Earnings per profit. It is obtained by
12.
share dividing the profits by the

number of outstanding

shares of common stock

Auction market a market where buyers
13. and sellers bargain

directly with each other
Financial instrument
representing ownership or
14. Securities debt, such as stocks and
bonds that provide claims .
to future expected cash
flows
15. A unit of ownership in the
Share capital stock of a
corporation
Secondary A financial market in which
16. securities previously issued
market securities are traded
Real assets Property such as land or
equipment. As
17. distinguished from financial
assets. such as stocks and
bonds
An institution (or individual)
who arranges purchases
18. Broker and sales of others and
receives a commission on
each transaction
Earning of a corporation
19. dividend that are distributed to
stockholders
 3.2
charter 3.2 money market

;

Short-term obligations; that

is, obligations having a

Money market maturity of one year or less.
1. .
instruments These include U.S.Treasury
,
bills, bankers acceptances,

and commercial paper.

.

A mutual fund that pools
Money market investors contributions and
2. fund invests them in various
money market instruments
.
Short term unsecured

promissory notes issued by

Commercial major corporations of

3. paper unguestioned credit
.
standing for borrowing
purposes

A formal receipt issued by a
4. Certificate of
bank for a specified amount
deposit
of money left with the bank .

An extension of credit by
5. Interbank loan
one bank to another

Money market Short-term obligations; that ;
6. instruments is, obligations having a

maturity of one year or less.


Spot Spot market The market in which an
asset is traded for .
7. immediate delivery also
called the cash market as
opposed to a market for
forward or future delivery .
IMF- International An international
Monetary Fund organization set up in 1944 1944
8. . (IMF) to super-vice exchange ,
rates and to promote
orderly international .
financial conditions.
A written promise to pay a
specified sum of money at
9. Promissory a specified time or on
note demand,

A written, evidencing the

depositing of a stated sum
of money, usually for a /
specific time frame at a
10. Savings specified rate of interest.
certificate The certificate must be
surrendered to the issuing
bank to obtain funds.

3.3
charter 3.3 foreign exchange market

Trading or exchanging of

1. Foreign the currencies of other

exchange countries in relation to one
.
another or to U.S. currency
The value of a unit nations
2. Foreign money in terms of another
exchange rate nations money
An international financial
system in which rates of
Fixed exchange exchange between the
3. rates values of different countries
currencies are maintained at
agreed-upon levels.

3 .4
charter 3.4 traditional market

Taking action to neutralize
Hedging
1. risk. .
An option contract in which
the option buyer has the
right (but not the
obligation ) to sell a ,
2. Put option Put option specified quantity of the
underlying asset at / /
aspecified price until the
expiration date of the
option

An option contract in which
the option has the right
3. Call option (abut not the obligation) to
buy a specified guantity of
the expiration date of the
option
.
One who tries reduce the
 risk of loss resulting from a
change in the price of a ,
particular asset. In futures
4. - Hedger markets, it is someone who
sells a futures contract
while holding the
underlying asset (short
hedger) or purchases such
a contract in anticipation of
purchasing the underlying
asset (long hedger).
A standardized agreement,
traded on an organized
futures exchange, for , ,
5. Futures contract delivery of a specific
commodity or security at a
specified price. .
6.

4. ,
part 4 money supply, moneytary policy

The total amount of funds

Money supply available for spending in
1.
the nation at any point in

time.

Open market Short-term obligations; ;
2. operations that is, obligations having
a maturity of one year or
less.

The general term for the
actions taken by the
3. Federal Reserve to
Monetary policy control the flow of money
and credit.
An expression of the
maximum amount of

Line of credit credit a bank is willing to
4. lend to a borrower. .
Confirmed lines of credit
are made known to the
customer; guidance lines
of credit are for the
banks internal use only

Balance of a record of payments
5. that one country makes
payment/ national/
to and receives from all
other foreign countries .
Required reserve The proportion of bank
6. ratio reserve to deposets that
a bank must hold
 according to law
Funds that a bank must
hold in the from of vault
7. Required reserves cash or deposits at the
Federal Reserve to meet
its required reserve ratio
Gross national product
8. Real GNP adjusted for the effects of -
inflation

The theory that a

proportional increase in
Quantity theory of the supply of money
9. money leads to a proportional
increase in the price level

- inflation Generally rising price

10. levels,
Gross national The total value of goods
() product (GNP) and services produced in
11. the economy in a given
year.
Graph of points showing
combinations of level of
12. LM curve GNP and inmerest rates
at which liguidity
preference eguals tne
money supply
The position based in
Classical economics that
13. monetarism an invisible hand pushes
the economy toward a full
employment level of
production at which it is
inherently smable and
that government efforts to
affect economic activity
through countercyclical
policies are unnecessary
and potentially damaging. .
Also associated with the
guantity theory of money .
Monetary base Total bank reserves plus
14. currency held by the
nonblank public
15. Money multiplier
money supply The total of currency
16. outside banks and +
demand deposits