Econ Final 20

Front 1

demand deposites

Back 1

- deposits of money held in a bank that can be withdrawn on demand, either by writing a check, or physically going to the bank

offers security
goes to tax records

Front 2

money market mutual funds

Back 2

Short term, like T-bills. 3-6 month
Checks, but limited.
Highly liquid near money

Front 3

dangers of stocks and bonds

Back 3

Value of these fluctuates - may not be able to recover original purchase price at any point in time.

Front 4

liquidity

Back 4

refers to the ease with which an asset can be converted into currency (or other assets).

Front 5

two types of money supply

Back 5

M1 - checkable deposits, currency, travelers’ checks.
M2 - M1, plus savings deposits, time deposits, money market mutual funds. (4x size of M1 - bulk of assets held in savings as opposed to transactions accounts)

Front 6

median of exchange

Back 6

facilitate exchange through lowering transactions cost.

Front 7

commercial banks

Back 7

largest segment of banking industry. Almost all demand deposits, and about half the savings accounts.

Front 8

savings and loans

Back 8

original purpose to specialize in consumer loans, especially housing.

Front 9

Credit unions

Back 9

cooperatives, where use is commonly restricted to some common affiliation, such as employer, union, etc

Front 10

reserver requirement

Back 10

percent of total deposits bank is required to keep in vault

Front 11

protection from bank failure

Back 11

reserver requirements a

and secondary reserves

Front 12

secondary reserves

Back 12

reserves held in highly liquid form, but which also earn interest, such as U.S. government bonds, held as additional protection.

Front 13

Bank Balance Sheet

Back 13

tells bank what it ows and what it is owed

Assets - reserves, loans outstanding, physical buildings. Things the bank owns.
Liabilities - checkable deposits, savings and time deposits, working capital.

Front 14

Healthy and solvent bank

Back 14

when assets are greater than liabilities

Front 15

excess reserves

Back 15

actual reserves - required reserves.