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26 Cards in this Set
- Front
- Back
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money
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an asset that can easily be used to purchase goods and services
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currency in circulation
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cash held by the public
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checkable bank deposits
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bank accounts on which people can write checks
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money supply
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total value of financial assets in the economy that are considered money
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a medium exchange
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an asset that individuals acquire for the purpose of trading rather than for their own consumption.
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store to value
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means holding purchasing power over time
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unit of account
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measure used to set prices and make economic calculations
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fiat money
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a medium of exchange whose value derives entirely from its official status as a means of payments
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near money
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not very liquid-meaning very hard to turn into cash and spend it, cannot be used for exchange
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federeal reserves
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the federal reserves estimates that 60% of US currency is actually held outside the US
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what is not in the money supply
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financial assets like stocks bonds. to turn stock and bonds into cash you have to sell the stock or the bond-soo they are not considered any money
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financial intermediary
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is what a bank is and it uses liquid assets in the form of bank deposits to finance the liquidity investments of borrowers
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t-account
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a tool for analyzing a business's financial position by showing in a single table the business assets on the left and liabilities on the right
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bank reserves
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currency banks hold on their vaults plus their deposits at the Federal Reserve
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reserve ration
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the fraction of bank deposits that bank holds as required reserves
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excess reserves
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are bank reserves over and above its required reserves
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monetary base
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the sum of currency in circulation and bank reserves
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money multiplier
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the ration of the money supply to monetary base
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central bank
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an institution that oversees and regulates the banking system and controls the monetary base
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Federal reserves
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is a central bank, and control the monetary base
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deposit insurance
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guarantees that a bank's depositors will be paid even if the bank can't come up with the funds
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reserves requirement
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rules that determine the federal reserves ratio
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discount window
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an arragement in which the fed res is stands ready to lend money to the banks that are in trouble
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federal funds market
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allows banks that fall short of the reserve requirement to borrow funds from banks with excess reserves
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federal funds rate
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the interest rate determined in the federal funds market
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discount rate
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the rate of interest the Fed charges on loans to banks
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