Term
|
Definition
widely accepted means of payment
1. currency-paper bills and coins
2. total reserves held by the banks at the Fed
3. Checkable deposits- your checking or debit accont
4. Savings deposits, money mkt mutual funds and small-time deposits |
|
|
Term
|
Definition
- The monetary base (MB): currency and total reserves held at the Fed
- M1: currency plus checkable deposits
- M2: M1 plus savings deposits, money mkt mutual funds and small-time deposits
|
|
|
Term
| fractional reserve banking |
|
Definition
| banks hold only a fraction of deposits in reserve, lending the rest |
|
|
Term
|
Definition
the ratio of reserves to deposits
if $1 in cash is held in reserve for every $10 deposits the reserve ratio is 1/10
|
|
|
Term
|
Definition
| the amount the money supply expands with each dollar increase in reserves. MM=1/RR |
|
|
Term
|
Definition
| change in reserves x money multiplier |
|
|
