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26 Cards in this Set
- Front
- Back
Money-
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An asset that serves as a means of payment, a store of purchasing power, and a unit of account.
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Liquidity-
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An asset's ability to be used directly as a means of payment, or to be readily converted into one, while retaining a fixed nominal value.
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Currency-
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Coins and paper money.
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Transaction deposit-
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A deposit from which funds can be freely withdrawn by check or electronic transfer to make payments to third parties.
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M1-
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A measure of the money supply that includes currency and transaction deposits.
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Saving deposit-
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A deposit at a bank that can be fully redeemed at any time, but from which checks cannot be written.
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Time deposit-
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A deposit at a bank or thrift institution from which funds can be withdrawn without payment of a penalty only at the end of an agreed-upon period.
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M2-
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A measure of the money supply that includes M1 plus retail money market mutual fun shares, money market deposit accounts, and saving deposits.
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Equation of exchange-
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An equation that shows the relationship among the money stock (M), the income velocity of money (V), the price level (P), and real domestic product (y); written as MV = Py
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Velocity (income velocity of money)-
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The ratio of nominal domestic income to the money stock; a measure of the average number of times each dollar of the money stock is used each year for income-producing purposes.
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Depository institutions-
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Financial intermediaries, including commercial banks and thrift institutions, that accept deposits from the public.
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Commercial banks-
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Financial intermediaries that provide a broad range of banking services, including accepting demand deposits and making commercial loans.
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Thrift institutions (thrifts)-
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A group of financial intermediaries that operate much like commercial banks; they include savings and loan associations, savings banks, and credit unions.
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Balance sheet-
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A financial statement showing what a firm or household owns and what it owes.
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Assets-
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All the things that the firm or household owns or to which it holds a legal claim.
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Liabilities-
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All the legal claims against a firm by nonowners or against a household by nonmembers.
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Net worth-
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The firm's or household's assets minus its liabilities.
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Reserves-
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Cash in bank vaults and banks' noninterest-bearing deposits with the Federal Reserve System.
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Central bank-
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A government agency responsible for regulating a country's banking system and carrying out monetary policy.
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Three uses/functions of money:
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-Payment
-store of purchasing power -unit of account. |
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M1 can include:
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-Travelers checks
-Transactions deposits -Demand deposits -Other checkable deposits |
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M2 can include:
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-M1
-Savings deposits (including MMDAs) -Small-denomination time deposits -Retail money market fund shares |
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Types of depository institutions:
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-Commercial banks (largest)
-Thrifts -Mutual savings banks -Credit unions. |
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Federal reserve system:
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-Composed of 12 federal reserve district banks.
-Additional 25 cities with branches of the federal reserve bank in their district. -Each fed reserve bank is separate unit chartered by federal government; its stockholders are commercial banks that are members of the Federal Reserve System.; Not typical private firms in that neither operated for profit nor ultimately controlled by their stockholders. -Each bank managed by a 9-member board; six selected by the member banks; other 3 appointed by Fed's Board of Governors. -Board of Governors is head of federal reserve system.; 12 fed reserve banks supervised; comprosed of 7 members appointed by president and confirmed by senate.; Each governor serves single 14-yr term |
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Banking risks:
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-Credit risk- risk of loan losses.
-Insufficient liquidity- having insufficient assets to cover withdrawals. |
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(FDIC)-
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Federal Deposit Insurance Corporation
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