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12 Cards in this Set
- Front
- Back
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Three functions of money |
Medium of exchange, measure of standard of value, and store of value. |
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Medium of exchange |
Something accepted by all parties as payment. |
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Measure of standard of value |
A common denomination used to express within terms most understand |
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Store of value |
Allows purchasing power to be saved until needed |
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Commodity money |
Made of something with economic value |
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Fiat money |
Holds value because government says so |
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4 characteristics of money |
Portability, divisiblity, durability, and keeping supplies low to maintain value. |
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Discount rate |
The price banks must pay to borrow money from the Federal Reserve |
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The reserve requirement |
The percent of a bank's deposits it must keep |
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Open market operations |
The buying/selling of government bonds to regulate the money supply |
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Tight money |
Raise discount rate, raise the reserve requirement, the Fed sells bonds to banks. |
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Easy money |
Lower discount rate, lower reserve requirement, the Fed buys bonds from banks. |
