1. 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

2. 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 fund1. 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 policy6. 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

3. from insurers and refund or repay the certain amount of insured assets9 if accident occurs. . The retirement fund The one kind of financial intermediaries. The . closely operates with10 , government agencies. . Collects large amount of money from small11 The investment fund investors and spends it. . This institution mainly12 deposits money and lends money . An interest-bearing13 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 , . Currency2. opposed to coin Counterfeit money Spurious ( bogus) , 3. coins and currency , that have been made to appear genuine

4. , 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 payment6. 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.

5. 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

6. 7. . , The party who is to T receive the proceeds of a8. Beneficiary trust, insurance policy, . letter of credit, or other transaction. A check drawn by a bank on its account with9. 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. Travelers 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 the13. Forged check drawers 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.

7. Electronic facilities, located inside or apart from a financial services Automated teller15. 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 services19. rendered A document, issued by an insurer, providing a20. Insurance certificate degree of protection for merchandise during transit Ownership interest, represented by stockholders investment Equity21. and retained earnings; the excess of a firms assets over its liabilities The party who issues a set of written instructions22. Drawer to a drawee, calling for a payment of funds The party to whom the drawer issues instructions to make payment. In the Drawee23. 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

8. 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 . banks 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.

9. 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 Irrevocable34. 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. .

10. 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 paying4. ( 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 another6. Credit risk The possibility that a debtor may . not be able to repay7. Interest Money paid for the use of money8. 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

11. 12. member financial institutions. . CHIPS (Clearing Aprivate telecommunications House Interbank service operated through the New13. Payment York Clearing House for settlement System . among participgting banks A bank that maintains a head Branch bank office 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 accounting18. = 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 22. and verification of account

12. 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-term28. assets . The portion of banks demand and time deposit? that must be kept in Legal reserves the form of cash or acceptable equivalents for depositors29. 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 .

13. 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 necessary33. A financial firm that purchases at , a discount the accounts receivable Factor of other firms and assumes the risks and responsibilities of collection34. , 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 agent36. releases the entrusted property Ownership interest, represented by stockholders investment and Equity retained earnings; the excess of a firms assets over its liabilities37. 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

14. 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 to46. 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.

15. 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 banks 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. . , .

16. 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 3. the 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, 7. Savings bank including checking accounts. See also

17. 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

18. . the holder voting Interest withheld when a note draft or bill is , Discount3. 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 of5. 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 issued8. 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). .

19. Money; paper currency . Bill10. 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 companys . Earnings per profit. It is obtained by12. 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 exp