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52 terms

Economics Chapter 10 and 16

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money
anything that serves a a medium of exchange, a unit of account and a store of value
medium of exchange
anything that is used to determine value during the exchange of goods and services
barter
the direct exchange of one set of goods or services for another
unit of account
a means for comparing the values of goods and services
store of value
something that keeps its value if it is stored rather than spent
currency
coins and paper bills used as money
commodity money
objects that have value in and of themselves and that are also used as money ex. salt, cattle, gems
representative money
objects that have value because the holder can exchange them for something else of value ex. IOUs
specie
coined money usually gold or silver, used to back paper money
fiat money
objects that have value because the government has decreed that they are acceptable means to pay debts ex. dollar bills
bank
an institution for receiving, keeping, and lending money
national bank
a bank chartered by the federal government
bank run
a widespread panic in which many people try to redeem their paper money at the same time
greenback
a paper currency issued during the Civil War
gold standard
a monetary system in which paper money and coins had the value of certain amounts of gold
central bank
a bank that can lend to other banks in time of need
member bank
a bank that belongs to the Federal Reserve System
foreclosure
the seizure of property from borrowers who are unable to repay their loans
money supply
all the money availiable in the US economy
liquidity
the ability to be used as or directly converted into cash
demand deposit
money in a checking account that can be paid out on demand or at any time
money market mutual fund
a fund that pools money from small savers to purchase short-term government and coporate securities
fractional reserve banking
a banking system that keeps only a fraction of its funds on hand and lends out the remainder
default
failing to pay back a loan
mortgage
a specific type of loan that is used to buy real estate
credit card
a card entitling its owner to buy goods and services based on the owner's promise to pay for those goods and services
interest
the price paid for the use of borrowed money
principal
the amount of money borrowed
debit card
a card used to withdraw money from a bank account
creditor
a person or instituiton to whom money is owed
monetary policy
the actions that the Federal Reserve System takes to influence the level of real GDP and the rate of inflation in the economy
reserves
deposits taht a bank keeps readily available as opposed to lending them out
reserve requirements
the amount of reserves that banks are required to keep on hand
check clearing
the process by which banks record whose account gives up money and whose account receives money when a customer writes a check
bank holding company
a company that owns more than one bank
federal funds rate
the interset rate that banks charge each other for loans
discount rate
the interest rate that the Federal Reserves charges commercial banks for loans
money creation
the process by which money enters into circulation
required reserves ratio
the fraction of deposits that banks are required to keep in reserve
money multiplier formula
a formula (cash deposit/RRR) used to determine how much new money can be created with each demand deposit and added to the money supply
excess reserves
bank reserves greater than the amount required by the Federal Reserve
prime rate
the rate of interest that banks charge on short-term loans to their best customers
open market operations
buying and selling of government securities in order to alter the supply of money
monetarism
the belief that the money supply is the most important factor in macroeconomic performance
easy money policy
a monetary policy that increases the money supply
tight money policy
a monetary policy that reduces the money supply
inside lag
the time it takes to implement monetary policy
outside lag
the time it takes for monetary policy to have an effect
commercial banks
national chartered banks and state chartered banks
credit unions
formed around something that people have in common ex. farmers teachers students
savings and loans bank
originally chartered to build homes; same function as commercial banks
FOMC
Federal Open Market Committee