Term
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Definition
| Assets people are generally willing accept in exchange for goods and services or fot payment of debts. |
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Term
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Definition
| Anything of value owned by a person or a firm. |
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Term
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Definition
| A good used as money that also has value independent of its use as money. |
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Term
| Five criteria make a good suitable for use as a medium of exchange: |
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Definition
1. The good must be acceptable to (usable by) most people.
2. It should be of standardized quality so that any two units are identical.
3. It should be durable so that value is not lost by spoilage.
4. It should be valuable relative to its weight so that amounts large enough to be useful in trade can be easily transported.
5. The medium of exchange should be divisible because different goods are valued differently. |
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Term
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Definition
| The central bank of the United States |
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Term
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Definition
| Money, such as paper currency, that is authorized by a central bank or gov't body and that does not have to be exchanged by the central bank for gold or some other commodity money. |
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Term
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Definition
| the narrowest definition of the money supply: The sum of currency in circulation, checking account deposits in banks, and holdings of traveler's checks. |
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Term
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Definition
| A broader definition of the money supply: It includes M1 plus savings account balances, small denomination time deposits, balances in money market deposit accounts in banks, and non-institutional money market fund shares. |
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Term
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Definition
| Deposits that a bank keeps as cash in its vault of on deposit with the Federal Reserve. |
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Term
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Definition
| Reserves that a bank is legally required to hold, based on its checking account deposits. |
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Term
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Definition
| The minimum fraction of deposits banks are required by law to keep as reserves. |
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Term
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Definition
| Reserves that banks hold over and above the legal requirement. |
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Term
| Simple deposit multiplier |
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Definition
| The ratio of the amount of deposits created by banks to the amount of new reserves. |
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Term
| Fractional reserve banking system |
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Definition
| A banking system in which banks keep less than 100 percent of deposits as reserves. |
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Term
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Definition
| A situation in which many depositors simultaneously decide to withdraw money from a bank. |
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Term
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Definition
| A situation in which many banks experience runs at the same time. |
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Term
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Definition
| Loans the Federal Reserve makes to banks. |
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Term
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Definition
| The interest rate the Federal Reserve charges on discount loans. |
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Term
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Definition
| The actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomics policy objectives. |
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Term
| Federal Open Market Committee (FOMC) |
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Definition
| The Federal Reserve committee responsible for open market operations and managing the money supply in the United States |
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Term
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Definition
| The buying and selling of Treasury securities by the Federal Reserve in order to control the money supply. |
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Term
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Definition
| A financial asset - such as a stock or a bond - that can be bought and sold in a financial market. |
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Term
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Definition
| The process of transforming loans or other financial assets into securities. |
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Term
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Definition
| The average number of times each dollar in the money supply is used to purchase goods and services included in GDP. |
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Term
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Definition
| A theory about the connection between money and prices that assumes that the velocity of money is constant. |
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Term
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Definition
| An economy that does not use money and in which people trade goods and services directly for other goods and services. Barter trade usually occurs only if there is a double coincidence of wants, where both parties to the trade want what the other one has. |
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Term
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Definition
| A monetary system under which the government produced gold coins and paper currency that were convertible into gold. Collapsed in the early 1930's making it now fiat money. |
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Term
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Definition
| Relates the money supply to the price level, is M x V = P x Y, where M is the money supply, V is the velocity of money, P is the price level, and Y is real output. |
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Term
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Definition
| The actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy goals. |
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Term
| The 4 monetary policy goals: |
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Definition
1. Price stability
2. High employment
3. Stability of financial markets and institutions
4. Economic growth |
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Term
| When the Fed increases the money supply... |
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Definition
| the short-term interest rate must fall until it reaches a level at which house holds and firms are willing to hold the additional money. |
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Term
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Definition
| The interest rate banks charge each other for overnight loans. |
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Term
| Expansionary monetary policy |
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Definition
| The Federal Reserve's increasing the money supply and decreasing interest rates to increase real GDP. |
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Term
| Contractionary monetary policy |
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Definition
| The Federal Reserve's adjusting the money supply to increase interest rates to reduce inflation. |
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Term
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Definition
| A rule developed by John Taylor that links the Fed's target for the federal funds rate to economic variables. |
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Term
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Definition
| Conducting monetary policy so as to commit the central bank to achieving a publicly announced level of inflation. |
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