Ch 14 – Money and Banking – McConnell – 20th edition Macroeconomics – Flashcards
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Money Market Mutual Fund Balances, Money Market Deposit accounts; Savings deposits under $100,000; everything also in M1
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M2 Money Supply
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Currency, coins, Checkable deposits, debit cards;
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M1
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he group that sets the Federal Reserve Systems policy on buying and selling government securities (bills, notes, and bonds) i
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Federal Open Market Committee (FOMC)
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Fed is privately owned, but managed in the public interest.
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quasi-public
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Paper Money
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Federal Reserve Notes
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Any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter.
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medium of exchange
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A standard unit in which prices can be stated and the value of goods and services can be compared; one of the three functions of money.
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unit of account
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An asset set aside for future use; one of the three functions of money.
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store of value
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The ease with which an asset can be converted quickly into cash with little or no loss of purchasing power. Money is said to be perfectly liquid, whereas other assets have a lesser degree of liquidity.
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Liquidity
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The most narrowly defined money supply, equal to currency in the hands of the public and the checkable deposits of commercial banks and thrift institutions.
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M1
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Paper money issued by the Federal Reserve Banks.
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Federal Reserve Notes
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Bills or coins for which the amount printed on the currency bears no relationship to the value of the paper or metal embodied within it; for currency still circulating, money for which the face value exceeds the commodity value.
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token money
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Any deposit in a commercial bank or thrift institution against which a check may be written.
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checkable deposits
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A firm that engages in the business of banking (accepts deposits, offers checking accounts, and makes loans).
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commercial banks
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A savings and loan association, mutual savings bank, or credit union.
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thrift institutions
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Financial assets, the most important of which are noncheckable savings accounts, time deposits, and U.S. short-term securities and savings bonds, which are not a medium of exchange but can be readily converted into money.
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near-monies
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A more broadly defined money supply, equal to M1 plus noncheckable savings accounts (including money market deposit accounts), small time deposits, (deposits of less than $100,000), and individual money market mutual fund balances.
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M2
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A deposit in a commercial bank or thrift institution on which interest payments are received; generally used for saving rather than daily transactions; a component of the M2 money supply.
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savings account
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Bank- and thrift-provided interest-bearing accounts that contain a variety of short-term securities; such accounts have minimum balance requirements and limits on the frequency of withdrawals.
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money market deposit account (MMDA)
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An interest-earning deposit in a commercial bank or thrift institution that the depositor can withdraw without penalty after the end of a specified period.
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time deposits
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Interest-bearing accounts offered by investment companies, which pool depositors' funds for the purchase of short-term securities. Depositors can write checks in minimum amounts or more against their accounts.
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money market mutual fund (MMMF)
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A nation's official currency (bills and coins). Payment of debts must be accepted in this monetary unit, but creditors can specify the form of payment, for example, "cash only" or "check or credit card only."
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legal tender
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The U.S. central bank, consisting of the Board of Governors of the Federal Reserve and the 12 Federal Reserve Banks, which controls the lending activity of the nation's banks and thrifts and thus the money supply; commonly referred to as the "Fed."
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Federal Reserve System
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The seven-member group that supervises and controls the money and banking system of the United States; the Board of Governors of the Federal Reserve System; the Federal Reserve Board.
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Board of Governors
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The 12 banks chartered by the U.S. government to control the money supply and perform other functions. (See central bank, quasi-public bank, and bankers' bank.)
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Federal Reserve Banks
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The 12-member group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities.
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Federal Open Market Committee (FOMC)
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High-interest rate loans to home buyers with above-average credit risk.
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subprime mortgage loans
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Bonds that represent claims to all or part of the monthly mortgage payments from the pools of mortgage loans made by leaders to borrowers to help them purchase residential property.
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mortgage-backed securities
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The process of aggregating many individual financial debts, such as mortgages or student loans, into a pool and then issuing new securities (financial instruments) backed by the pool. The holders of the new securities are entitled to receive the debt payments made on the individual financial debts in the pool.
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Securitization
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A 2008 Federal government program that authorized the U.S. Treasury to loan up to $700 billion to critical financial institutions and other U.S. firms that were in extreme financial trouble and therefore at high risk of failure.
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Troubled Asset Relief Program (TARP)
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The broad category of firms that provide financial products and services to help households and businesses earn interest, receive dividends, obtain capital gains, insure against losses, and plan for retirement. Includes commercial banks, thrifts, insurance companies, mutual fund companies, pension funds, investment banks, and securities firms.
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financial services industry
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A law that gave authority to the Federal Reserve to regulate all large financial institutions, created an oversight council to look for growing risk to the financial system, established a process for the Federal government to sell off the assets of large failing financial institutions, provided Federal regulatory oversight of asset-backed securities, and created a financial consumer protection bureau within the Fed.
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Wall Street Reform and Consumer Protection Act
