Chapter 14 Vocab
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Federal Reserve System (Fed)
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the privately owned, publicly controlled central bank of the United States.
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Federal Reserve Notes
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issue paper currency and is also a key part of our money supply.
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Barter Economy
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moneyless economy that relies on trade.
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Commodity Money
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money that has an alternative use as an economic good, or commodity.
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Fiat Money
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money by government decree.
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Specie
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or money in the form of silver or gold coins.
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Monetary Unit
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standard unit of currency, in the U.S. money system.
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Medium of Exchange
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something that is accepted by all parties as payment for goods and services.
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Measure of Value
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common measuring stick that can be used to express worth in terms that most individuals understand.
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Store of Value
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the quality that allows purchasing power to be saved until needed.
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Demand Deposit Accounts (DDAs)
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funds deposited in a bank that can be accessed by writing a check without having to secure prior approval of the institution.
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M1
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which includes coins and currency, travelers' checks, DDAs, and checking accounts held at other depository institutions.
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M2
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which includes M1 along with savings deposits, time deposits, and money market funds all of which relate to money's functions as a store of value.
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State Bank
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is a bank that receives its operating charter from a state government.
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Legal Tender
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fiat currency that must be accepted in payment for debts. \"Greenbacks\"
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National Bank
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is a privately owned bank that receives its operating charter from the federal government.
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National Currency
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banks issued their own notes that were backed with bonds that the banks bought from the federal government.
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Gold Certificates
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paper currency backed by gold placed on deposit with the United States Treasury.
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Silver Certificates
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paper currency backed by silver dollars and bullion placed on reserve with the Treasury.
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Central Bank
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is a bank that can lend to other banks in times of need.
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Bank Run
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concern about the safety of banks deposits often caused a rush by depositors to withdraw their funds from a bank before it failed.
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Bank Holiday
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President Roosevelt announced a brief period during which every bank in the country was required to close.
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Fractional Reserve System
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banks are required to keep only a portion of their total deposits in the form of legal reserves.
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Legal Reserves
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consist of coins and currency that banks hold in their vaults, plus deposits at the Fed.
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Reserve Requirement
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the percentage of every deposit that must be set aside as legal reserves.
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Member Bank Reserve (MBR)
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a deposit a member bank keeps at the Fed to satisfy reserve requirements.
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Excess Reserves
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legal reserves beyond the reserve requirement represents the bank's lending power and can be loaned out.
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Member Bank
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is a commercial bank that is a member of, and holds shares of stick in, the Fed.
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Monetary Policy
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important function of the Fed is to conduct changes in the money supply in order to affect the availability and cost of credit.
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Interest Rates
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the price of credit to a borrower.
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Easy Money Policy
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the Fed expands the money supply, causing interest rates to fall.
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Tight Money Policy
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the Fed restricts the size of the money supply.
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Open Market Operations
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second tool of the monetary policy and is the buying and selling of government securities in financial markets.
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Discount Rate
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the interest the Fed charges on loans to financial institutions is the third major tool of monetary policy.
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Prime Rate
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the lowest rate of interest commercial banks charge their best customers.
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Quantity Theory of Money
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hypothesis that the supply of money directly affects the price level over the long run.
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Currency
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the paper component of the money supply, is made up of Federal Reserve notes that are printed by the U.S. Bureau of Engraving and Printing.
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Coins
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metallic forms of money such as pennies, nickels, dimes, quarters, and the new presidential dollar coin.
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Bank Holding Companies
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firms that own and control one or more banks.
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Regulation Z
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the Fed has the authority to extend truth-in-lending disclosures to millions of individuals who borrow from retail stores, automobile dealers, banks, and lending information.
