Chapter 15: Money And Banks

Front 1

Barter

Back 1

Trading one good or service for another directly, without using money.

Front 2

Double Coincidence of Wants

Back 2

A situation in which both of two people each wants some food or service that the other person can provide.

Front 3

Medium of Exchange

Back 3

Whatever is widely accepted as a method of payment.

Front 4

Unit of Account

Back 4

The common way in which market values are measured in an economy.

Front 5

Store of Value

Back 5

Something that serves as a way of preserving economic value that can be spent or consumed in the future.

Front 6

Money

Back 6

Whatever serves society in three functions: Medium of exchange, unit of account, and store of value.

Front 7

Currency

Back 7

Coins and paper money.

Front 8

Demand deposits

Back 8

Deposits in banks that are available by making a cash withdrawal or writing a check.

Front 9

M1

Back 9

A narrow definition of the money supply that includes currency, traveler's checks, and checking accounts in banks.

Front 10

M2

Back 10

A definition of the money supply that includes everything in M1, but also adds saving deposits, money market funds, and certificates of deposit.

Front 11

Saving Deposits

Back 11

Bank accounts where you can't withdraw money by writing a check, but can withdraw the money at a bank–or can transfer it easily to a checking account.

Front 12

Money Market Funds

Back 12

Where the deposits of many investors are pooled together and invested in a safe way like short-term government bonds.

Front 13

Certificate of Deposit (CD)

Back 13

A mechanism for a saver to deposit funds at a bank and promise to leave the, at the bank for a time, in exchange for a higher rate of interest.

Front 14

Time Deposits

Back 14

Accounts that the depositor has committed to leaving in the bank for a certain period of time, in exchange for a higher rate of interest; also called certificates of deposit.

Front 15

Financial Intermediary

Back 15

An institution that operates between a saver with financial assets to invest and an entity who will receive those assets and pay a rate of return.

Front 16

Assets

Back 16

Items of value owned by a firm or an individual.

Front 17

Liabilities

Back 17

Any amounts or debts owed by a firm or an individual.

Front 18

Balance Sheet

Back 18

An accounting tool that lists assets and liabilities.

Front 19

T-account

Back 19

A balance sheet with two-column format, with the T-shape formed by the vertical line down the middle and the horizontal line under the column headings for "Assets" and "Liabilities."

Front 20

Bond

Back 20

A financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that was borrowed and also a rate of interest over a period of time in the future.

Front 21

Reserves

Back 21

Funds that a bank keeps on hand and that are not loaned out or invested in bonds.

Front 22

Net Worth

Back 22

Total assets minus total liabilities.

Front 23

Asset-Liability

Back 23

A bank's liabilities can be withdrawn in the short term while its assets are repaid in the long term.

Front 24

Diversify

Back 24

Making loans or investments with a variety of firms, to reduce the risk of being adversely affected by events at one or a few firms.

Front 25

Reserve Ratio

Back 25

The proportion of deposits that the bank holds in the form of reserves.

Front 26

Money Multiplier

Back 26

Total money in the economy divided by the original quantity of money, or change in the total money in the economy divided by a change in the original quantity of money.