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32 Cards in this Set
- Front
- Back
Money
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Any asset that can be used as a means of payment for purchases and to settle debts.
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Commodity Money
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An asset with intrinsic value, such as a gold or silver coin, that is generally accepted as a means of payment for purchases and to settle debts.
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Fiat Money
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An asset with no intrinsic value, such as paper currency, that is generally accepted as a means of payment for purchases and to settle debts.
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Medium of Exchange
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An asset used in purchasing goods and services.
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Barter
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The direct trade of goods or services for other goods or services.
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Unit of Account
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A basic measure of economic value. |
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Store of Value
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An asset that serves as a means of holding wealth.
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M1
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Sum of currency outside banks and balances held in demand deposits.
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M2 |
All the assets in M1 plus some additional assets that are usable in making payments but at greater cost or inconvenience than currency or chequing accounts.
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Bank Reserves
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Cash or similar assets held by commercial banks for the purpose of meeting depositor withdrawals and payments.
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100 percent Reserve Banking
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A situation in which banks' reserves equal 100 percent of their deposits.
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Reserve-Deposit Ratio
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Bank reserves divided by deposits. Desired reserve-deposit ratio=Bank Reserves/Bank deposits |
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Fractional-Reserve Banking System
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A banking system in which bank reserves are less than deposits so that the reserve-deposit ratio is less than 100 percent.
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Banking Panic
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Occurs when there is a rush of withdrawals from the banking system made by depositors responding to news or rumors of impending bankruptcy of multiple banks.
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Bank Run
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Occurs when depositors of a particular bank respond to news or rumours of impending bankruptcy of that particular bank by rushing to withdraw their deposits from the bank.
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Currency
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Refers to bank notes and coins.
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Seigniorage
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Refers to the profit gained from the issue of paper money or coins.
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Deposit Insurance
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Is provided to financial institutions such as banks so that the deposits of their customers are insured in case the financial institution goes bankrupt.
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Lender of Last Resort
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An institution, typically a central bank, that will extend credit to financial institutions during a financial panic to keep the payments system operating smoothly.
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Liquidity
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Refers to the ease with which an asset can be converted to cash. |
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Key Policy Rate
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A general term for the interest rate that the central bank controls to achieve its monetary policy objective.
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Quantitative Easing
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The unconventional monetary policy of actively creating central bank reserves for the purchase of financial assets.
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Effective Lower Bound
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The lowest practically feasible level for a central bank's key policy rate.
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Credit Easing
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The unconventional monetary policy of the central bank purchasing private-sector financial assets in order to reduce interest rate spreads.
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Zero Interest Rate Commitment
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A promise made by a central bank that it will maintain its key policy rate at the effective lower bound for an extended periods.
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Open-Market Purchase
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The purchase of government bonds from the public by the central bank for the purpose of increasing the supply of bank reserves.
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Open-Market Sale
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The sale by the central bank of government bonds for the purpose of reducing bank reserves.
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Open-Market Operations
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Open-market purchases and open-market sales
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Reserve Requirements |
Set by some central banks, the minimum values of the ratio of bank reserves to bank deposits that commercial banks are allowed to maintain; the Bank of Canada does not set reserve requirements |
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Government Debt Shifting
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The transfer of government deposits by the central bank between the governments account at the central bank and the governments account at commercial banks.
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Quantity Equation
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An amount of money times its velocity equals nominal GDP M x V = P x Y |
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Velocity of Money
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A measure of the speed at which money changes hands in transactions involving final goods and services V=(P x Y)/M |