Chapter 13 Money – Flashcards

Any asset people are generally willing to accept in exchange for goods and services or for payment of debts

Anything of value owned by a person or firm

Economies where goods and services are traded directly for other goods and services

Each person must want what the other has: This is the problem with barter economies

A good used as money that also has value independent of its use as money

By making exchange easier, money allows for SPECIALIZATION and HIGHER PRODUCTIVITY.

(1) Medium of Exchange (2)Unit of Account (3) Store of Value (4) Standard of Preferred Payment

The ease with which an assets can be converted into the medium of exchange

Agency of the government that regulates the money supply

Central Bank of the US

Money, like paper currency, that is authorized by a central bank or governmental body and that doesn't have to be exchanged by the central bank for gold or some other commodity

The federal government requires that it be accepted in payments of debts and requires that cash or checks denominated in dollars be used in payment of taxes

Currency in circulation Checking Account Deposits Traveler's Checks

M1 Savings account deposits Noninstitutional money market fund shares Small denomination time deposits (CD's) Balances in money market deposit accounts in banks

The ratio of the amount of deposits created by banks to the amount of new reserves 1/RR

= change in bank reserves x 1/RR

A banking system in which banks keep less than 100% of deposits as reserves

A situation in which many depositors simultaneously decide to withdraw from a bank

A situation in which many banks experience runs at the same time

Loans the Federal Reserve makes to banks

the Interest Rate the federal reserve charges on discount loans

The actions the fed takes to manage the money supply and interest rates to pursue microeconomic policy objectives

(1) Open Market Operations (2) Discount Policy (3) Reserve Requirements

The buying and selling of Treasury Securities by the FED in order to control the money supply

A financial asset - such as a stock or bond - that can be bought and sold in a financial market

The process of transforming loans or other financial assists into securities

M x V = P x Y

The average number of times each dollar in the money supply is used to purchase goods and services included in GDP

Velocity is constant.