Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/25

Click to flip

25 Cards in this Set

  • Front
  • Back

Double Co-incodence

When a person wants to find someone who wants what they have and is selling what the person wants.

Functions of money

1) Medium of money


2) Unit of Account


3) Store of Value

Money is

The most liquid asset

Fiat Money

-Government declared currency


-No intrisnic value


-Rest of the world uses fiat money

Measure of the Dollar


M1: currency, deposits (checking only), travelers checks


M2: Includes M1, time deposits, saving deposits, money market accounts (all must be small)

Roles of Federal Reserve

1) Regulted banks (deposits > $14 M)


2) Lender of last resort


3) Control the quantity



Lender of last resort

Federal bank lends to banks who cannot secure over nigh loans for other banks so they main in business



Quantity of money in the economy

Money Supply

Federal Reserve Structure

1) Board of Structure


2) 12 federal banks


3) Policy Making Body



Board of Structure


-7 members - 14 year term


-nominated and confirmed by president and senate

Policy Making Body

-"Federal Open- Market Committee"- FOMC


-Voting Members


~Board of Governers (7)


~Federal Bank Presidents (4)


~NY bank President (1)


~10 total


~meet every 6 weeks on Tuesday

Controlling the Money Supply

1) Set required reserve supply


2) Discount Rate


3) Open Market Operation

Required Reserve Supply

10 % (big banks= >104 M)


3 % (smaller banks= 15-104 M)



Discount Rate

???



Open Market Operation

buys/sells government securities on the market



Another Word for Securities

Treasury Bills

How banks create money

-Transforms reserves into loans


- Base money(Monetary Base) is currency and reserves


-Money Supply is currency and deposits

Currency Drain

-when people and firms hold on to currency rather than deposits


-if currency goes up, means banks are holding more cash

Reserve Ratio (r) Equation

Reserve


-------------


Deposit

Monetary Base (MB) Equation

Currency + reserve

Money Supply (MS) Equation

currency + deposit



Simple Money Multiplier Equation

1 excess + reserve


------- or --------------------------


reserve deposit


ratio

Currency (c) Equation

currency


----------------


deposit

Change in MS Equation

change in reserve x (1/r)

Complex Money Multiplier Equation

1 + currency 1+c


--------------------------------- -----------


currency + reserve ratio c+r