Macro Test Chapter 32 , 33
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what function of money enables society to gain the benefits of geographic and labor specialization
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medium of exchange
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paper money or currency in the us is essentially a debt of a
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government agency
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the paper currencies of the us
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federal reserve notes
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federal reserve banks are owned by
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member banks
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money supply m1 does not include the currency held by
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commercial banks
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what is most liquid
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checkable deposits
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members of the federal reserve board of governers are appointed by the president to
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staggered 14 year terms
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sets policy on the sale and purchase of government bonds by the fed
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federal open market committee
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does the federal reserve system provide banking services to the general public
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no
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what is one consequence of fractional reserve system
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bank runs
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checkable deposits ar considered blank to banks
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liabilities
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properties are considered blank to banks
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assets
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a bank is in the position to make loans when required reserves are blank actual reserves
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less than
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primary reason commercial banks must keep required reserves on deposit at the fed is to allow the fed to control the amount of
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bank lending
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federal funds rate is the rate that banks pay for loans from
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other banks
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equal tp excess reserved times the money multiplier
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maximum checkable deposit expansion
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the multiple by which commercial banking system can expand the money supple equals the reciprocal of the
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reserve ratio
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when bankers hold excess reserves, the money creating potential of the banking system
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decreases
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money that is usable for buying and selling goods and services
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medium of exchange
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society used monetary units as yardsticks for measuring rlative worth of goods
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unit of account
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money that enables people to transfer purchasing power from the present to the future
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store of value
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an assets ease with whivh it can be converted to cash with no purchasing power lost
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liquidity
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what does the m1 consist of
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currency checkable deposits
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cash and coins
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currency
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all deposits in commercial banks or thrift institutions on whcih checks of any size can be drawn
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checkable deposits
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bills or coins for which the amount printed on the currency bears no relationship to the value of paper or metal
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token money
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highly liquid financial assets that do not fully function as a medium of exchange but can easily be converted to currency or checkable deposits
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near monies
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what does the m2 money supply include
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m1 noncheckable savings accounts small time deposits individual money market mutual fund balances
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a deposit in a commercial bank or thrift institution on which interest payments are received
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savings account
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interest bearing accounts offered by commercial banks and thrift institutions that invest deposited funds into a variety of short term securities
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money market deposit account
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an interest earning deposit in a commercial bank or thrift institution that invest deposited funds into a variety of short term securities
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time deposit
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mutual funds that invest in short term securities by using the combined funds of individual shareholders to buy interest bearing short term credit instruments
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money market mutual funds
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any form of currency that by law must be accepted by creditors for the settlement of a financial debt
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legal tender
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what is another name for creditors
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lenders
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the us central bank consisting of the board of governors and the 12 federal reserve banks, that controls the lending activity of banks and thrifts and thus the money supply
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federal reserve system
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the seven member group that supervises and controls te money and banking system of the us
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board of governors
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the 12 banks chartered by the us gov that collectively act as the central bank of the us
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federal reserve banks
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set monetary policy and regulate the private banking system under the direction of the board of governors and federal open market committee
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federal reserve banks
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12 member group that decides monetary policy and how it is executed through open market operations
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federal open market committee
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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 purchase residential property
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mortgage backed securities
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the process of aggregating many individual financial debts into a pool and then issuing new securities backed by the pool
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securitization
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federal program that authorized the us treasury tp loan up tp 700 billion to critical financial institutions and other us firms that were in extreme financial trouble
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troubled asset relief program
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the possibility that individuals or institutions will change their behavior as the result of a contract or agreement
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moral hazard
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banks supported by tax payer money
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quasi public banks
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the value or purchasing powerr is blank related to the price level
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inversely
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backed by the governments ability to keep value stable
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money supply
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state and national banks that provide checking and savings accounts and make loans
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commercial banks
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savings and loan, mutual savings, credit unions that offer checking and saving accounts and make loans
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thrifts
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offer policies with which individuals pay premiums to insure against loss
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insurance companies
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pool costumer deposits to purchase stocks or bonds
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mutual fund companies
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collect savings from workers and then invest funds to pay retirement benefits
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pension funds
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offer security advice and buy and sell stocks and bonds for clients
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securities firms
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firms that help corporations and governments raise money by selling stocks and bonds
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investment banks
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only a portion of checkable deposits are backed up by reserves of currency in bank vaults pr deposits at the central bank
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fractional reserve banking
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a statement of assets, liabilities, and net worth of a firm or individual at some given time
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balance sheet
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the currency a bank has on hand in its vault and cash drawers
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vault cash
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the funds that each commercial bank and thrift institution must deposit eith its local federal reserve bank or hold as vault cash
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required reserves
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reserve ratio
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required reserves divided by liabilities
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what does excess reserves equal
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actual minus required
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the interest rate that us banks charge one another on overnight loans made out of their excess reserves
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federal funds rate
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the reserve ratio for all commercial banks is
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20 percent
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the multiple of its excess reserves by which the banking system can expand checkable deposits and thus the money suoply by making new loans
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monetary multiplier
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the money multiplier equals
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one divided by required reserve ratio
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stored gold and gave a receipt to be used as money by public
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goldsmiths
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maximum amount of new money created by a single dollar of excess reserves
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money multiplier
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the use of borrowed money to magnify profits and losses
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leverage
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does a $200 deposit into checking account create new money
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no
