Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
16 Cards in this Set
- Front
- Back
|
M1
|
measure of the money supply, includes:
-demand deposits -currency -other checkable deposits -traveler's checks |
|
|
M2
|
M1 + "near monies"
|
|
|
near monies
|
things with monetary value that can be redeemed for money, includes:
-savings accounts -certificates of deposit (CDs) with short maturation -some money market mutual funds |
|
|
M3
|
M2 + CDs with long maturation
|
|
|
L
|
M3 + government securities with maturities under 18 months, savings bonds
|
|
|
What are the functions of money?
|
-medium of exchange
-unit of measurement -store value |
|
|
How is money created?
|
-govt creates in response to customers and business
-when people borrow money from banks -when govt borrows money |
|
|
Required reserves
|
minimum amount of money that a depository institution must have in its vault or on deposit with the Fed. The amount is a set percentage of the bank’s deposits.
|
|
|
Money multiplier
|
Formula: M = 1/R x excess
ex: reserve = 20% = 1/5 money multiplier = 1/1/5 = 5 |
|
|
How does the federal reserve system work?
|
There are 12 regional federal reserve banks, which services/regulates the banks in its district. These 12 banks are run by a board of governors with 7 people.
|
|
|
What is the most important function of the federal reserve system?
|
To control the creation of money by depository institutions.
|
|
|
Difference between commodity and fiat
|
fiat money is when money has value because the government says it is (legal tender)
|
|
|
Three major goals of Fed
|
-setting reserve requirements
-lending money to financial institutions -buy and sell govt securities |
|
|
Federal Funds Market
|
when one bank borrows the excess reserves of another bank
|
|
|
Federal Funds Rate
|
interest rates charged on federal funds borrowed
|
|
|
discount rate
|
interest rate charged by federal reserve on loans to depository institutions
|
