Term
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Definition
medium of exchange- money is an asset we use to buy goods and services using dollars
unit of account- all goods and services are priced in terms of money, in US priced in dollars
store of value- Dollars not spent on goods and services in one time period can be held for use in the future
standard of deferred payment- in the US contracts involving future payments are usually written specfying payment in dollars |
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Term
| What asset has to have to serve as a medium of exchange |
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Definition
| generally acceptable, of standerdized quality, durable, valuable relative to its weight, divisible |
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Term
| At one time all money was what? |
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Definition
| commodity money, meaning it has usefulness as money or commodity like coin or jewlry, can be awkward and inefficient to use. |
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Term
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Definition
| ex. dollar bills declared as money by government and bc people have confidence in it, no commodity |
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Term
| Federal Reserve uses two defintions of money based on different functions of money what is M1? |
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Definition
currency-all paper money and coins in circulation (not held by banks or government)
checking account balances and banks, and
value of outstanding traveler's checks |
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Term
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Definition
M1
savings accounts and small (less than 100,000) time deposits accounts, such as certificates of deposit (CDs)
money market deposit acounts and banks
noninstitutional money market share funds |
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Term
Ml more closely related to what?
M2 more closely related to what? |
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Definition
related to function of money as a medium of exchange
money adds assets that are thought of as stores of value. |
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Term
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Definition
| not included in money supply, because only when you pay your credit card is transaction complete, because technically before only taking loan from bank |
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Term
Can write checks for what in M1
Cant write checks for what in M1 |
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Definition
against checking account deposits
against savings accounts and CDs
BEcause checking acounts are part of M1, banks play and important role in determining supply of money and how supply of money changes |
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Term
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Definition
| checking account deposit balances |
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Term
| Checking accounts at banks owned by what? |
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Definition
| households, business firms, the government |
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Term
| Balance sheet lists what? |
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Definition
what the bank owns (assets) left
what the bank owes (liabilities and stockholders equity) right |
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Term
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Definition
| Liabilities + Stockholder's Equity |
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Term
| Banks required to do what? |
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Definition
| by law required to keep 10 percent of their either physically in the bank, as vault cash, or on deposit at the regional Federal Reserve Bank |
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Term
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Definition
| Vault Cash +deposits at the Fed, Reserves are deposits that have not been loaned out or used to purchase securities |
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Term
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Definition
| Reserves- Required Reserves |
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