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Definition
| Any medium that is universally accepted in an economy both by sellers of goods and services as payment for those goods and services and by creditors as payments for debts. |
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| Any item that sellers will accept as payment. |
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| The direct exchange of goods and services for other goods and services without the use of money. |
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| A measure by which prices are expressed; the common denominator of the price system; a central property of money. |
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| The ability to hold value over time; a necessary property of money. |
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| standard of deferred payment |
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Definition
| A property of an item that makes it desirable for use as a means of settling debts maturing in the future; an essential property of money. |
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| The degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value and with small transaction costs. |
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| What is the most liquid asset? |
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Definition
| Checkable and debitable account balances in commercial banks and other types of financial institutions, such as credit unions and savings banks. Any accounts in financial institutions from which you can easily transmit debit-card and check payments without restrictions. |
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Term
| fiduciary monetary system |
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Definition
| A system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services. |
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| The amount of money in circulation. |
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| A method of measuring the money supply by looking at money as a medium of exchange. |
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| A method of measuring the money supply by looking at money as a temporary store of value. |
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| The money supply, measured as the total value of currency plus transaction deposits plus traveler's checks not issued by banks. |
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Definition
| Financial institutions that accept deposits from savers and lend funds from those deposits out at interest. |
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Definition
| Financial institutions that receive most of their funds from the savings of the public. They include savings banks, savings and loan associations, and credit unions. |
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| Financial instruments obtained from a bank or nonbanking organization and signed during a purchase that can be used in payment upon a second signature by the purchaser. |
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| M1 plus (1) savings deposits at all depository institutions, (2) small-denomination time deposits, and (3) balances in retail money market mutual funds. |
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| A banker's bank, usually an official institution that also serves as a bank for a nation's government treasury. |
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Term
| What kind of banks regulate commercial banks? |
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Definition
| The process by which financial institutions accept savings from businesses,households, and governments and lend the savings to other businesses, households, and governments. |
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| Institutions that transfer funds between ultimate lenders (savers) and ultimate borrowers. |
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| Information possessed by one party in a financial transaction but not by the other party. |
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| The tendency for high-risk projects and clients to be overrepresented among borrowers. |
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| The possibility that a borrower might engaged in riskier behavior after a loan has been obtained. |
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| Amounts owed, the legal claims against a business or household by nonowners. |
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| Amounts owned, all items to which a business or household can legally claim. |
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Definition
| The Federal Reserve System; the central bank of the United States. |
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Term
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Definition
| The Federal Reserve's role as an institution that is willing and able to lend to a temporarily illiquid bank that is otherwise in good financial condition to prevent the bank's illiquid position from leading to a general loss of confidence in that bank or in others. |
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Term
| fractional reserve banking |
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Definition
| A system in which depository institutions hold reserves that are less than the amount of total deposits. |
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Term
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Definition
| In the U.S. Federal Reserve System, deposits held by Federal Reserve district banks for depository institutions plus depository institution's vault cash. |
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Definition
| The fraction of transactions deposits that banks hold as reserves. |
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Definition
| A statement of the assets and liabilities of any business entity, including financial institutions and the Federal Reserve System. Assets are what is owned, liabilities are what is owed. |
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| The purchase and sale of existing U.S. government securities (such as bonds) in the open private market by the Federal Reserve System. |
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Definition
| A number that, when multiplied by a change in reserves in the banking system, yields the resulting change in the money supply. |
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Term
| potential money multiplier |
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Definition
| The reciprocal of the multiplier ratio, assuming no leakages into currency. It is equal to 1 divided by the reserve ratio. |
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Definition
| Attempt by many of a bank's depositors to convert transactions and time deposits into currency out of fear that the bank's liabilities may exceed its assets. |
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Term
| Federal Deposit Insurance Corporation (FDIC) |
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Definition
| A government agency that insures the deposits held in banks and most other depository institutions. All U.S. banks are insured this way. |
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