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Double coincidence of wants

The situation in which each of two parties to an exchange has what the other wants

Money

Anything that is generally accepted in exchange for goods and services

Medium of exchange

anything that is generally accepted as a standard of value and a measure of wealth in a particular country or region

Commodity money

objects that have value in themselves and that are also used as money

Unit of account

a common unit for measuring the value of each good or service

Store of value

something with the ability to hold value over time

Gresham's law

people tend to trade away inferior money and hoard the best

Seigniorage

the difference between the face value of money and the cost of supplying it; the profit from issuing money

Token money

money whose face value exceeds its cost of production

Check

a written order instructing the bank to pay someone an amount deposited

Fractional reserve banking

a banking system that keeps only a fraction of funds on hand and lends out the remainder

Bank notes

originally, pieces of paper promising a specific amount of gold or silver to anyone who presented them to issuing banks for redemption; today, Federal Reserve notes are mere paper money

Representative money

money that is backed by an item of value, such as gold or silver

Fiat money

money that the government declares to be legal tender although it cannot be converted into standard specie

Legal tender

any kind of money that a creditor must by law accept in payment for debts

Financial intermediaries

financial institutions through which savers can indirectly provide funds to borrowers

Depository institutions

commercial banks and thrift institutions; financial institutions that accept deposits from the public

Commercial banks

The largest financial intermediary directly involved in the financing of real estate.

Thrift institutions

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

Federal Reserve System

the central bank and monetary authority of the U.S

Reserves

Funds the bank use to satisfy the cash demands of their customers and the reserve requirements of the Fed; reserves consist of cash held by banks plus deposits at the Fed

Federal Open Market Committee

(FOMC) - the 12 member group that determines the purchase and sale policies of the Federal Reserve Banks in the market for U.S. government securities.

Open market operations

the buying and selling of government securities to alter the supply of money

Money market mutual fund

a fund that pools money from small savers to purchase short -term government and corporate securities

Bank branches

a bank's additional offices that carry out banking operations

Bank holding company

corporation that owns one or more banks and does not accept deposits or make loans

Subprime mortgage

a loan granted to individuals with poor credit histories who do not qualify for a conventional mortgage

Mortgage-backed security

is either an ownership claim in a pool of mortgages or an obligation that is secured by such a pool.

Trouble Asset Relief Program

Government program that invested in financial institutions to help stabilize markets

Too big to fail

A company is this if it is perceived that the failure of a certain firm will cause a general economic crash/panic.

Dodd-Frank Wall Street Reform and Consumer Protection Act

Regulatory changes made to prevent another financial crisis.

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