Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

21 Cards in this Set

  • Front
  • Back
What is money?
any commodity or token that is generally accepted as a means of payment
What 3 vital functions does money serve?
medium of exchange
Unit of account
Store of value
What objects do we use money as today?
currency (dollar bills and coins)
Deposits at banks
Money 1 (m1) is:
Currency, travelers checks, checkable deposits
Money 2 (m2) is:
All of M1 plus savings deposits, small time deposits, money market funds, and other deposits
Monetary system:
Consists of federal reserves and accepts deposits and makes loans
WHen a bank makes a loan it:
creates money
Banks have a balance sheet, what does each side list?
Assets- reserves, loans, iouw/ earning assets.
Liabilities: net worth, deposits
Assets =
liabilities + net worth
If reserves < deposits then you are
a fractional reserve banker
The "fed" is:
The federal reserve system:
What is the purpose of the fed
to establish required reserve ratio =10%

authorized to be the lender of last resort

operates open market operations
If your reserves are 1000, (actual total or legal) then your required reserve is:
If your reserves were 1000, and your required reserves were 100, what is your excess reserve?
Your excess reserve is your
limit of lending power
excess reserves=
RRR(required reserve ratio)X deposits
To increase money, the fed buys:
Securites (US treasury bonds)
When a bank increases its money and reserves its called
multiple expansion
Why increase money and thus decrease interest rate?
Needed a way to give people purchasing power
What are 3 big insights of keynes?
1. output generates income
2. incomes generate spending ("propensity to consume")
3. spending generates output
Consumption =
DI (disposable income)