Macroeconomics Exam 2 Vocab Ch 10, 11 And 12

Front 1

CH. 10

• The exchange of one good for another, without the use of money.

Back 1

Barter

Front 2

• Any commonly accepted good that acts as a medium of exchange, a measure of value, and a store of value.

Back 2

• Any commonly accepted good that acts as a medium of exchange, a measure of value, and a store of value.

Front 3

• Paper money that is not backed by or convertible into any good.

Back 3

Fiat money

Front 4

• Coins and paper money.

Back 4

Currency

Front 5

• The degree to which an asset can easily be exchanged for money.

Back 5

Liquidity

Front 6

• Typically, M1 money. The supply of currency, demand deposits, and traveler’s checks used in transactions.

Back 6

Money supply

Front 7

• The supply of the most immediate form of money. It includes currency, demand deposits, and traveler’s checks.

Back 7

M1 Money supply

Front 8

• M1 money plus less-immediate forms of money, such as savings accounts, money market mutual fund accounts, money market deposit accounts, repurchase agreements, and small-denomination time deposits.

Back 8

M2 Money supply

Front 9

• M2 money plus large-denomination time deposits and large-denomination repurchase agreements

Back 9

M3 Money supply

Front 10

• The average number of times per year each dollar is used to transact an exchange.

Back 10

Velocity of money

Front 11

• MV = PQ. The quantity of money times its velocity equals the quantity of goods and services produced times their prices.

Back 11

Equation of exchange

Front 12

• P = MV/Q. The equation specifying the direct relationship between the money supply and prices

Back 12

Quantity theory of money

Front 13

• The quantity of money demanded by households and businesses to transact their buying and selling of goods and services.

Back 13

Transactions demand for money

Front 14

CH. 11

• A banking system that provides people immediate access to their deposits but allows banks to hold only a fraction of those deposits in reserve.

Back 14

Fractional reserve system

Front 15

• The bank’s statement of liabilities (what it owes) and assets (what it owns).

Back 15

Balance sheet

Front 16

• The percentage of demand deposits banks and other financial intermediaries are required to keep in cash reserves.

Back 16

Legal reserve requirement

Front 17

• Firms that accept deposits from savers and use those deposits to make loans to borrowers

Back 17

Financial intermediaries

Front 18

• The increase in the money supply that is potentially generated by a change in demand deposits.

Back 18

Potential money multiplier

Front 19

• The quantity of reserves held by a bank in excess of the legally required amount

Back 19

Excess reserves

Front 20

• A government insurance agency that provides depositors in FDIC-participating banks 100 percent coverage on their first $100,000 of deposits.

Back 20

Federal Deposit Insurance Corporation (FDIC)

Front 21

CH. 12

• A promissory note, issued by a bank, pledging to redeem the note for a specific amount of gold or silver. The terms of redemption are specified on the note.

Back 21

Bank note

Front 22

• A commercial bank that receives its charter or license to function from a state government and is subject to the laws of that state.

Back 22

State-chartered bank

Front 23

• A commercial bank that receives its charter from the comptroller of the currency and is subject to federal law as well as the laws of the state in which it operates.

Back 23

Nationally chartered bank

Front 24

• The Fed’s principal decision-making body, charged with executing the Fed’s open market operations.

Back 24

Federal Open Market Committee

Front 25

• The interest rate the Fed charges banks that borrow reserves from it.

Back 25

Discount rate

Front 26

• Policy directives used by the Fed to moderate swings in the business cycle.

Back 26

Countercyclical monetary policy

Front 27

• The minimum amount of reserves the Fed requires a bank to hold, based on a percentage of the bank’s total deposit liabilities.

Back 27

Reserve requirement

Front 28

• The market in which banks lend and borrow reserves from each other for very short periods of time, usually overnight.

Back 28

Federal funds market

Front 29

• The interest rate on loans made by banks in the federal funds market.

Back 29

Federal funds rate

Front 30

• The buying and selling of government bonds by the Federal Open Market Committee

Back 30

Open market operations

Front 31

• The maximum percentage of the cost of a stock that can be borrowed from a bank or any other financial institution, with the stock offered as collateral.

Back 31

Margin requirements