Day 10 Macroecon

Front 1

Double Co-incodence

Back 1

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

Front 2

Functions of money

Back 2

1) Medium of money

2) Unit of Account

3) Store of Value

Front 3

Money is

Back 3

The most liquid asset

Front 4

Fiat Money

Back 4

-Government declared currency

-No intrisnic value

-Rest of the world uses fiat money

Front 5

Measure of the Dollar

Back 5

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

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

Front 6

Roles of Federal Reserve

Back 6

1) Regulted banks (deposits > $14 M)

2) Lender of last resort

3) Control the quantity

Front 7

Lender of last resort

Back 7

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

Front 8

Quantity of money in the economy

Back 8

Money Supply

Front 9

Federal Reserve Structure

Back 9

1) Board of Structure

2) 12 federal banks

3) Policy Making Body

Front 10

Board of Structure

Back 10

-7 members - 14 year term

-nominated and confirmed by president and senate

Front 11

Policy Making Body

Back 11

-"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

Front 12

Controlling the Money Supply

Back 12

1) Set required reserve supply

2) Discount Rate

3) Open Market Operation

Front 13

Required Reserve Supply

Back 13

10 % (big banks= >104 M)

3 % (smaller banks= 15-104 M)

Front 14

Discount Rate

Back 14

???

Front 15

Open Market Operation

Back 15

buys/sells government securities on the market

Front 16

Another Word for Securities

Back 16

Treasury Bills

Front 17

How banks create money

Back 17

-Transforms reserves into loans

- Base money(Monetary Base) is currency and reserves

-Money Supply is currency and deposits

Front 18

Currency Drain

Back 18

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

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

Front 19

Reserve Ratio (r) Equation

Back 19

Reserve

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

Deposit

Front 20

Monetary Base (MB) Equation

Back 20

Currency + reserve

Front 21

Money Supply (MS) Equation

Back 21

currency + deposit

Front 22

Simple Money Multiplier Equation

Back 22

1 excess + reserve

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

reserve deposit

ratio

Front 23

Currency (c) Equation

Back 23

currency

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

deposit

Front 24

Change in MS Equation

Back 24

change in reserve x (1/r)

Front 25

Complex Money Multiplier Equation

Back 25

1 + currency 1+c

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

currency + reserve ratio c+r