Econ Chapt 10

Front 1

Medium of exchange

Back 1

an item that buyers give to sellers when they want to purchase goods and services.

Front 2

unit of account

Back 2

the yardstick people use to post prices and record debts.

Front 3

Store value

Back 3

an item that people can use to transfer purchasing power from the present to the future.

Front 4

Liquidity

Back 4

the ease with whichan asset can be converted into the economy’s medium of exchange.

Front 5

Money

Back 5

the set of assets in an economy that people regularly useto buy goods and services from other people.

Front 6

commodity money

Back 6

money thattakes the form of a commodity with intrinsic value.

Front 7

flat money

Back 7

money without intrinsic value that is used as money because of government decree.

(ex:gold is commodity because it's valuable, paper made for money is not and is flat)

Front 8

Currency

Back 8

the paper bills andcoins in the hands of the public.

Front 9

demand deposits

Back 9

balances in bank accounts that depositors can access on demand by writing a cheque or using a debit card.

Front 10

central bank

Back 10

an institution designed to regulate the quantity of money in the economy.

Front 11

Money supply

Back 11

the quantity of money available in the economy.

Front 12

monetary policy

Back 12

the setting of the money supply by policymakers in the central bank.

Front 13

How can changes in the money supply have a profound effect on the economy

Back 13

a. Prices rise when the government prints too much money. b. Society faces a short-run tradeoff between inflation andunemployment.

Front 14

reserves

Back 14

deposits that banks have received but have not loaned out

Front 15

fractional-reserve banking

Back 15

a banking system in which banks hold only a fraction of deposits as reserves.

Front 16

reserve ratio

Back 16

the fraction of deposits that banks hold as reserves.

Front 17

money multiplier

Back 17

the amount of money the banking system generates with eachdollar of reserves.

mm=1/reserve ratio

Front 18

open marketoperations

Back 18

the purchase and sale of government bonds by the Bank of Canada.

Front 19

foreign exchange market operations

Back 19

the purchase or sale of foreign money by the Bank of Canada.

Front 20

sterilization

Back 20

The process of offsetting foreign exchange market operations with open-market operations so that the effect on the money supply is cancelled out.

Front 21

reserverequirements

Back 21

regulations on the minimum amount of reserves that banks must hold against deposits.

Front 22

BANK RATE

Back 22

the interest ratecharged by the Bank of Canada on loans to the commercial banks.

Front 23

overnight rate

Back 23

the interest rate on very short-term loans between commercial banks.