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13 Cards in this Set
- Front
- Back
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evolution of money
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no money, barter, commodity money
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3 functions of money
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medium of exchange (universally accepted), unit of account (standard to base prices on), store of value (indicates wealth)
anything can be money if it fills these three requirements |
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7 characteristics money must have if it is useful
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durable, portable, divisible, uniform quality, supply and demand don't fluctuate, limited supply, low opportunity cost
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token money
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money whose exchange value exceeds the cost of production
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seigniorage
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the government spends the money it makes which raises its revenues
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early money
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-goldsmiths began checking accounts
-goldsmiths promised to pay interest on deposited money to compete for savers: began savings accounts -gold smiths wrote bank notes promising a certain amount of gold when redeemed -governments took over bank notes and created fiat money |
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representative money
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bank notes that exchange for a specific commodity, such as gold
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fiat money
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money not redeemable for anything of intrinsic value; declared money by government decree
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fractional reserves
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cash that banks have on hand in their vaults or on deposit with the federal reserve
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the federal reserve
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3 tools: reserve ratio, discount rate, open market operations
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money supply
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M1-the narrowest definition of money supply; consists of currency (including coins) held by the nonbanking public, checkable deposits, and traveler's checks
M2-a broader definition of the money supply, consisting of M1 plus savings deposits, small-denomination time deposits, and money market mutual fund accounts M3 |
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interest bearing assets
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bonds, mutual funds, stocks, commodities, hedge funds
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loans
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mortgage, car loan, student loan, personal loan, credit card
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