Econ Final Review Money

Flashcard maker : Andrew Hubbs
Medium of Exchange
An item buyers give to sellers when they want to purchase goods or services.
Unit of Account
A measurement people use to post prices and record debt.
Store of Value
An item people can use to transfer purchasing power from the present to the future.
Commodity Money
Items that take the form of a commodity with intrinsic value.
Fiat Money
Money without intrinsic value, used as money because of a government decree.
Transaction Demand
Money used as a medium of exchange – determined by nominal GDP.
Asset Demand
Money people want to hold as a store of value.
Total Money Demand
Assets + Transactions
Money Supply
Quantity of money available in the economy.
Currency
Paper bills and coins in the hands of the (non-bank) public.
Checkable Deposits
Balances in bank accounts that depositors can access on demand by writing a check.
Acceptability
One reason why money is valuable. Currency and checkable deposits are accepted as a medium of exchange.
Legal Tender
One reason why money is valuable. Paper money is a valid and legal means of payment of any debt contracted in dollars.
Relative Scarcity
One reason why money is valuable. Depends on supply and demand – the greater quantity, the less value it has.
Central Bank
An institution that oversees the banking system and regulates the money supply.
Monetary Policy
The setting of the money supply by policy makers in the central bank.
Federal Reserve
The central bank of the United States.
Board of Governors
The seven member group heading the Federal Reserve.
14
The number of years served in a term by each member of the Board of Governors.
12
The number of Regional Fed Banks located around the United States.
Federal Open Market Committee
Decides the monetary policy
Fractional Reserve Banking System
Banks keep a fraction of deposits as reserves, and use the rest to make loans.
Reserve Requirements
Regulations on the minimum amount of reserves that banks must hold against deposits
Reserve Ratio
Fraction of deposits that banks hold as reserves, i.e. total reserves as a percentage of total deposits.
T-account
A simplified accounting statement that shows a banks assets and liabilities.
Money Supply def. 2
Currency + Deposits
Money Multiplier
The amount of money the banking system generates with each dollar of reserves. 1/R

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