Chapter 19 Money, Banks, And The Federal Reserve System

Front 1

Asset

Back 1

Anything of value owned by a person or firm.

Front 2

Bank panic

Back 2

A situation in which many banks experience runs at the same time.

Front 3

Bank run

Back 3

A situation in which many depositors simultaneously decide to withdraw money from a bank.

Front 4

Commodity money

Back 4

A good used as money that also has value independent of its use as money.

Front 5

Discount loans

Back 5

Loans the Federal Reserve makes to banks.

Front 6

Discount rate

Back 6

The interest rate the Federal Reserve charges on discount loans.

Front 7

Excess reserves

Back 7

Reserves that banks hold over the legal requirement.

Front 8

Federal open market committee (FOMC)

Back 8

The Federal Reserve committee responsible for open market operations and managing the money supply in the United States.

Front 9

Federal Reserve

Back 9

The Central Bank of the United States.

Front 10

Fiat money

Back 10

Money, such as paper currency, that is authorized by a central bank or governmental body and that does not have to be exchanged by the central bank for gold or some other commodity money.

Front 11

Fractional reserve banking system

Back 11

A banking system in which banks keep less than 100% of deposits as reserves.

Front 12

M1

Back 12

The narrow definition of the money supply: the sum of currency in circulation, checking account deposits in banks, and holdings of traveler's checks

Front 13

M2

Back 13

A broader definition of the money supply: it includes M1 plus savings account deposits, small-denomination time deposits, balances in money market deposit accounts in banks, and non-institutional money market fund shares.

Front 14

Monetary policy

Back 14

The actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy objectives.

Front 15

Money

Back 15

Assets that people are generally willing to except in exchange for goods and services or for payment of debts.

Front 16

Open market operations

Back 16

The buying and selling of treasury securities by the Federal Reserve in order to control the money supply.

Front 17

Quantity theory of money

Back 17

A theory about the connection between money and prices that assumes that the velocity of money is Constant

Front 18

Required reserve ratio

Back 18

The minimum fraction of deposits banks are required by law to keep as reserves.

Front 19

Required reserves

Back 19

Reserves that the bank is legally required to hold, based on its checking account deposits.

Front 20

Reserves

Back 20

Deposits that a bank keeps as cash and it's bolt or on deposit with the Federal Reserve.

Front 21

Securitization

Back 21

The process of transforming loans or other financial assets into securities.

Front 22

Security

Back 22

A financial asset – such as a stock or bond – that can be bought and sold in a financial market.

Front 23

Simple deposit multiplier

Back 23

The ratio of the amount of deposits created by banks to the amount of new reserves.

Front 24

Velocity of money

Back 24

The average number of times each dollar in the money supply is used to purchase goods and services included in GDP.