| Term | Definition |
|---|
| Barter Economy | An economy in which trades are made in goods and services instead of money |
| Double Coincidence of Wants | The situation in which each of two parties to an exchange had what the other wants. In a barter economy, it is a requirement that must be met before a trade can be made. |
| Transaction Costs | The costs associated with the time and effort needed to search out, negotiate, and consummate an exchange. |
| Money | A good that is widely accepted for purposes of exchange and in the repayment of debt. |
| Face Value | The stated denomination on paper money or coins. |
| Gresham's Law | An economic law stating that bad money drives good money out of circulation. |
| Medium of Exchange | Anything that is generally acceptable in exchange for goods and services. |
| Unit of Account | A common measurement in which values are expressed. |
| Store of Value | Something with the ability to hold value over time. |
| Fractional Reserve Banking | A banking arrangement in which banks hold only a fraction of their deposits and lend out the remainder. |
| Money Supply | The total supply of money in circulation, composed of currency, checking accounts, and traveler's checks. |
| Currency | Coins issued by the U.S. treasury and paper money issued by the Federal Reserve System. |
| Federal Reserve Note | Paper money issued by the Federal Reserve System. |
| Demand Deposit | A deposit that can be withdrawn in currency or transferred by a check to a third party on the initiative of the owner. |
| Savings Account | An interest-earning account. |
| Near-Money | Assets, such as nonchecking savings accounts, that can be easily and quickly turned into money. |
| Debit Card | A card that can be used to withdraw funds at automated teller machines and to pay for purchases by electronically transferring funds from on account to another. |
| Federal Reserve System (the Fed) | The central bank of the U.S. |
| Board of Governors of the Federal Reserve System | The governing body of the Federal reserve System. |
| Federal Open Market Committee | The 12-member policy-making group within the Fed. This group has the ability to conduct open market operations. |
| Reserve Account | A bank's checking account with its Federal Reserve district bank. |
| Total Reserves | The sum of a bank's deposits in its reserve account at the Fed and its vault cash. |
| Required Reserves | The minimum amount of reserves a bank must hold against its deposits as mandated by the Fed. |
| Reserve Requirement | A regulation that requires a bank to keep a certain percentage of each dollar deposited in the bank in its reserve account with the Fed or in its vault. |
| Excess Reserves | Any reserves held beyond the required amount; the difference between total reserves and required reserves. |
| Monetary Policy | The deliberate control of the money supply by the Fed. |
| Open Market Operations | Buying and selling of government securities by the Fed. |
| Federal Funds Rate | The interest rate one bank charges another bank for a loan. |
| Discount Rate | The interest rate the Fed charges a bank for a loan. |
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