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34 Cards in this Set

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Money
Any good that is widely accepted for purposes of exchange and in the repayment of debt.
Barter
exchanging goods and services for other goods and services without the use of money.
Medium of exchange
Anything that is generally acceptable in exchange for goods and services. A function of money.
Unit of account
A common measure in which relative values are expressed. A function of money.
Store of Value
The ability of an item to hold value over time. A function of money.
Double coincidence of wants
In a barter economy, a requirement that must be met before a trade can be made.
M1
Includes currency held outside banks, checkable deposits and traveler's checks.
Currency
Coins and paper money.
Federal Reserve Notes
Paper money issued by the fed.
Checkable Deposits
Deposits on which checks can be written.
M2
M1, savings deposits, small-denomination time deposits, money market mutual funds.
Savings Deposit
An interest-earning account at a commercial bank or thrift institution. Checks cannot be written from this account.
Money Market Deposit Account
An interest-earning account that has a minimum required balance and offer limited check-writing privileges.
Time Deposit
An interest-earning deposite with a specified maturity date. Subject to penalities for early withdrawal.
Money Market Mutual Fund
An interest-earning account at a mutual fund company. Minumum balance is required and has limited check-writing privileges.
Fractional Reserve Banking
A banking arrangement that allows banks to hold reserves equal to only a fraction of their deposit liabilities.
Federal Reserve System
-The Fed
-The central bank of the U.S.
Reserves
The sum of bank deposits at the Fed and vault cash.
Required Reserve Ratio
-r
-A percentage of each dollar deposited that must be held on reserve (at the Fed or in the bank's vault).
Required Reserves
The minimum amount of reserves a bank must hold against its checkable deposits as mandated by the Fed.
Excess Reserves
Any reserves held beyond the required amount. The difference between total reserves and required reserves.
T-Account
A simplified balance sheet that shows the changes in a bank's assets and liabilities.
Simple deposit multiplier
1/r
Cash leakage
Occurs when funds are held as currency instead of being deposited into a checking account.
Monetary policy
Changes in the money supploy, or in the rate of change of the money supply, to achiever particular macroeconomic goals.
Open Market Purchase
The buying of government securities by the Fed.
Open Market Sale
The selling of government securities by the Fed.
Reserve Requirement
The rule that specifies the amount of reserves a bank must hold to back up deposits.
Federal Funds Market
A market where banks lend reserves to one another, usually for short periods.
Federal Funds Rate
The interest rate in the federal funds market
Discount Rate
The interest rate the Fed charges depository institutions that borrow reserves from it.
What happens as a result of an open market purchase/sale?
Money supply rises/falls.
What happens as a result of raising/lowering the required reserve ratio?
Money supply rises/falls
What happens as a result of lowering/raising the discount rate?
Money supply rises/falls.