Term
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Definition
| Any asset that can easily be used to purchase goods and services |
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Term
| What is currency in circulation? |
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Definition
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Term
| What are Checkable bank deposits? |
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Definition
| bank accounts on which people can write checks |
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Term
| What is a medium of exchange? |
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Definition
| an asset that individuals acquire for the purpose of trading rather than for their own consumption |
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Term
| What is a store of value? |
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Definition
| a means of holding purchasing power over time |
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Term
| What is a unit o account? |
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Definition
| a measure used to set prices and make economic calculations |
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Term
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Definition
| a good used as a medium of exchange that has other uses |
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Term
| What is a commodity-backed money? |
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Definition
| a medium of exchange which no intrinsix value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods |
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Term
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Definition
| a medium of exchange whose value derives entirely from its official status as a means of payment |
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Term
| What is a money aggregate? |
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Definition
| an overall measure of the money supply |
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Term
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Definition
| financial assets that can't be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits |
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Term
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Definition
| currency banks hold in their vaults plus their deposits at the federal reserve |
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Term
| What are the three roles of money? |
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Definition
a medium of exchange
a store of value
and a unit of account |
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Term
| What is the reserve ratio? |
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Definition
| The fraction of bank deposits that a bank holds as reserves |
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Term
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Definition
| a phenomenon in which many of a bank's depositors try to withdraw their funds due to fears of a bank failure |
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Term
| What is deposit insurance? |
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Definition
| what guarantees that a bank's depositors will be paid even if the bank can't come up with the funds, up to a maximum amount per account |
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Term
| What are reserve requirements? |
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Definition
| Rules set by the Federal Reserve that determine the minimum reserve ratio for a bank. |
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Term
| What are excess reserves? |
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Definition
| A bank's reserves over and above its required reserves |
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Term
| What is the monetary base? |
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Definition
| The sum of currency in circulation and bank reserves |
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Term
| What is the money multiplier? |
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Definition
| the ration of the money and supply to the monetary base |
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Term
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Definition
| An institution that oversees and regulates the banking system and controls the monetary base. |
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Term
| What does the federal funds market allow? |
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Definition
| Banks that fall short of the reserve requirement to borrow funds from banks with excess reserves |
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Term
| What is the federal funds rate? |
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Definition
| The interest rate determined in the federal funds market |
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Term
| What is the discount rate? |
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Definition
| The rate of interest the Fed charges on loans to banks |
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Term
| What is the discount rate? |
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Definition
| The rate of interest the Fed charges on loans to banks |
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Term
| What is the evolutionary breakdown of the monetary system? |
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Definition
| No Trade --> Trade w/Barter --> Commodity Money --> Commonly-backed Money --> Fiat Money |
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Term
| What is an open-market operation? |
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Definition
| A purchase or sale of government dept by the Fed. |
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Term
| What are the three monetary aggregates known as and how do you solve for them? |
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Definition
M1 = Curr. in Circ. + Checkable bank deposits + Traveler's checks
M2 = M1 + savings acct deposits+money market deposits+time deposits
M3 = M2 + Large denominated time deposits (CDs)+ other financial assets with greater penalties for early withdrawal |
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Term
| What are the three money aggregates and what do they represent? |
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Definition
M1--(Consists of cash/near cash assets)
M2--(Broader Measure--Includes M1 plus savings acct deposits, money market deposits, and time deposits)
M3--(broadest measure--M2 plus Large denomiinated time deposits (CDs) and other financial assets with greater penalties for early withdrawal) |
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Term
| What is a fractional reserve banking system? |
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Definition
| a system in which commercial banks and the saving&loan banks are required to hold only a fraction of their checkable deposit liabilities as cash reserves in their vaults or with the district federal reserve bank |
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Term
| What banking system does the U.S. have and what does it allow? |
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Definition
| fractional reserve banking system; banks to extend credit and create moeny through deposit expansion |
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Term
| What are the factors that increase frictional and structural unemployment? |
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Definition
unemployment insurance
minimum wage laws
labor unions
efficiency wages |
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Term
| What relationship do the unemployment and inflation rate have? |
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Definition
| Negative (when the unemployment rate is low, inflation is high and vice versa) |
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Term
| What is the Phillips curve |
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Definition
| curve related to the changes in the short-run aggregate demand (axes are unemployment and inflation rate) |
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Term
| What are the diff types of unemployment in Krugman's text? |
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Definition
| Structural, Frictional, Cyclical |
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Term
| What is frictional unemployment? |
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Definition
| unemployment due to the time workers spend in job search |
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Term
| What is structural unemployment? |
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Definition
| unemployment that results when there are more ppl seeking jobs in a labor market that there are jobs available at the current wage rate |
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Term
| What is cyclical unemployment? |
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Definition
| unemployment that rises during economic downturns and falls when the economy improves |
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