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Details

Economics Final
Chapters 15-17
39
Economics
Undergraduate 2
05/21/2008

Additional Economics Flashcards

 


 

Cards

Term
 
 
 
 
Money
 
Definition

 

 

 

 

 

Anything that is regularly used in exchange

Term

 

 

 

 

Medium of Exchange

Definition

 

 

 

 

 The property of money that exchanges are made through the use of money

 

Term

 

 

 

 

 
Barter

Definition

 

 

 

 

 

Trading goods directly for goods

 

 

Term

 

 

 

 

 

Double Coincidence of wants

 

 

Definition

 

 

 

 

 

The problem in a system of barter that one person may not have what the other desires.

Term

 

 

 

 

 Unit of Account

 

Definition

 

 

 

 

 

 The property of money that prices are quoted in terms of money

 

Term

 

 

 

 

Store of Value

Definition

 

 

 

 

 

 The property of money that prices are quoted in terms of money

 

Term

 

 

 

 

M1

Definition

 

 

 

 

The sum of currency in the hands of the public plus demand deposits plus other checkable deposits

 

Term

 

 

 

 

 

M2

Definition

 

 

 

 

 

 

M1 plus other assets, including deposits in savings and loans and money market mutual funds

 

Term

 

 

 

 

 

Liabilities

Definition

 

 

 

 

 

The sources of funds for a bank, including deposits

Term

 

 

 

 

 

Balance Sheet

 

Definition

 

 

 

 

 

 

An account for a bank that shows the sources of its funds as well the uses of the funds

 

Term

 

 

 

 

 

Assets

Definition

 

 

 

 

 

The uses of the funds of a bank

 

Term

 

 

 

 

Net Worth

Definition

 

 

 

 

 

The difference between assets and liabilities

Term

 

 

 

 

 

Reserves

Definition

 

 

 

 

 

The fraction of banks' deposits that banks are legally required to hold in their vaults or as deposits at the Fed

Term

 

 

 

 

 

Excess Reserves

Definition

 

 

 

 

 

Any additional reserves that a bank holds above its required reserves

Term

 

 

 

 

 

Reserve Ratio

Definition

 

 

 

 

 

The ratio of reserves to deposits 

Term

 

 

 

 

Money Multiplier

Definition

 

 

 

 

Any initial deposit leads to a multiple expansion of deposits.  In the simplified case, increase in deposits = (initial deposit) x (1/ reserve ratio)

Term

 

 

 

 

 

Open Market Purchases

Definition

 

 

 

 

The Fed's purchase of government bonds, which increases the money supply

Term

 

 

 

 

Open Market Sales

Definition

 

 

 

 

The Fed's sale of of government bonds to the public, which decreases the money supply

Term

 

 

 

 

 

Discount Rate

Definition

 

 

 

 

The interest rate at which banks can borrow from the Fed

Term

 

 

 

 

Federal Funds Market

Definition

 

 

 

 

The market in which banks borrow and lend reserves to one another

Term

 

 

 

 

 

Central Bank

Definition

 

 

 

 

An official bank that controls the supply of money in a country.

Term

 

 

 

 

Federal Reserve Bank

Definition

 

 

 

 

One of 12 regional banks that are an official part of the Federal Reserve System

Term

 

 

 

 

Board of Governors of the Federal Reserve

Definition

 

 

 

 

 

The seven person governing body of the Federal Reserve system in Washington D.C.

Term

 

 

 

 

FOMC

Definition

 

 

 

 

The group that decides on monetary policy

Term

 

 

 

 

 

Accelerator Theory

Definition

 

 

 

 

The theory of investment that says that current investment spending depends positively on the expected future growth of real GDP

Term

 

 

 

 

 

Procyclical

Definition

 

 

 

 

 

A component of GDP is procyclical if it rises and falls with the overall level of GDP

Term

 

 

 

 

 

Bond

Definition

 

 

 

 

 

A promise or IOU to pay money in the future in exchange for money now

Term

 

 

 

 

 

Nominal Interest Rate

Definition

 

 

 

 

 

Interest rates quoted in financial markets

Term

 

 

 

 

 

Real Rate of Interest

Definition

 

 

 

 

 

The nominal rate minus the inflation rate

Term

 

 

 

 

 

Liquidity Demand for Money

Definition

 

 

 

 

 

The demand for money that represents the needs and desires of individuals or firms to make purchases on short term 

Term

 

 

 

 

 

Speculative Demand for Money

Definition

 

 

 

 

 

The demand for money that reflects the fact that holding money over short periods is less risky than holding stocks or bonds

Term

 

 

 

 

Monetary Policy

Definition

 

 

 

 

The range of actions taken by the Federal Reserve to influence the level of GDP or the rate of inflation

Term

 

 

 

 

Exchange Rate

Definition

 

 

 

 

The rate at which one currency trades for another in the market

Term

 

 

 

 

 

 

Definition
Term

 

 

 

 

Comparitive Advantage

Definition

 

 

 

 

The ability of one person or nation to produce a good at an oppurtunity cost that is lower than the oppurtunity cost for another person or nation

Term

 

 

 

 

 

Quota

Definition

 

 

 

 

 

A limit on the amount of a good that can be imported 

Term

 

 

 

 

 

Tariff

Definition

 

 

 

 

 

A tax on an imported good

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