chapter 21
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21 terms
Terms | Definitions |
|---|---|
 money | the set of assets in an economy that people regularly use to buy goods and services from other people |
| medium of exchange | an item that buyers give to sellers when they want to purchase goods and services |
| unit of account | the yardstick people use to post prices and record debts |
| store of value | an item that people can use to transfer purchasing power from the present to the future |
| liquidity | the ease with which an asset can be converted into the economy's medium of exchange |
| commodity money | money that takes the form of a commodity with intrinsic value |
| fiat money | money without intrinsic value that is used as money because of government decree |
| currency | the paper bills and coins in the hands of the public |
| demand deposits | balances in bank accounts that depositors can access on demand by writing a check |
| FED | the central bank of the US |
| central bank | an institution designed to oversee the banking system and regulate the quantity of money in the economy |
| money supply | the quantity of money available in the economy |
| monetary policy | the setting of the money supply by policymakers in the central bank |
| reserves | deposits that banks have received but have not loaned out |
| fractional reserve banking | a banking system in which banks hold only a fraction of deposits as reserves |
| reserve ratio | the fraction of deposits that banks hold as reserves |
| money multiplier | the amount of money the banking system generates with each dollar of reserves |
| open-market operations | the purchase and sale of US government bonds by the FED |
| reserve requirements | regulations on the minimum amount of reserves that banks must hold against deposits |
| discount rate | the interest rate on the loans that the FED makes to banks |
| federal funds rate | the interest rate at which banks make overnight loans to one another |
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