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34 Cards in this Set

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double coincidence of wants
the unlikely coinidence that 2 ppl each have a G or S that the other wants
money
the set of assets in an economy htat people regularly use to buy G or S from others
medium of exhcange
an item that buyers give to sellers when they want to purchase G or S
unit of account
the "yardstick" ppl use to poset P and record debts
store of value
an item that ppl can use to transfer purchasing power from the present to the future
wealth
used to refer to the total of all stores of value including both money and non money assets
liquidity
the ease with which an asset can be converted into the economy's MOE
commodity money
money that takes the form of a commodity with intrinsic value
fiat money
money without intrinsic value that is used as money because of govt decree
currency
the paper bills and coins in the hands of the public
money stock
quantity of money circulating in economy
demand deposits
balances in the bank acct that depositors can access on demand by writing a check
federal reserve (fed)
central band of USA
-lender of last resort
central bank
institution used to oversee banking system and regulate quantity of money in economy
money supply
the setting of the money supply by policy makers in the central bank
To increase the money supply
-fed buys govt bonds
-this gives the ppl more money on hand
to decrease money supply
-Fed sells bonds
-this gives ppl less money on hands
reserves
deposits that banks have recieved but have not loaned out
-if banks hold all money in reserves they cant influence money supply
fractional reserve banking
a banking system in which banks hold only a fraction of deposits as reserves
reserve ratio
the fraction of deposits that banks hold as reserves
when banks hold a fraction of mula in reserve they create _____ but not ______
money
wealth
money multiplyer
the amt of money the banking system generates with each dollar of reserves
Money Multiplyer=
1/ReserveRatio
open market operations
the purchase and sale of US govt bonds by the Fed
reserve requirements
regulations on the min amt of reserves that banks must hold against deposits
increase in reserve requirements
banks must hold more money in reserves and therefore can loan out less of each dollar deposited
-This incrases reserve ratio, decreases money multiplier, decrease money supply
a decrease in the reserve requirments
decreases reserve ratio
increases money multiplier
increases money supply
discount rate
interest rate on the loans that the fed makes to banks
increase in discount rate
decrease quantity of reserves
decreases money supply
decrease discount rate
increases quantity of reserves
increases money suppy
solvent
assets exceed liabilities
reserve ratio=
reserves/deposits
money supply=
initial deposits * money multiplier
total reserves=
initial deposits