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Econ U5

Terms in this set (31)

What are the three functions of money
Medium of exchange: an item buyers give to sellers when they want to purchase goods & services

Unit of Account: the yardstick people use to post prices and record debts

Store of value: an item people can use to transfer purchasing power from the present to the future
When buyers give money to sellers when they want to purchase gasoline this is an example of which function of money
Medium of exchange
a 100 dollar price tag on a ipod is which function of money
Unit of account
three functions of federal service are
ensure stable banking system
control the flow of money
provide financial services to member banks
what provides insurance for depositors money in banks
FDIC
FDIC
Federal Deposit Insurance Corporation
Money Supply
is the total amount of money in circulation.
M1- Currency, travelers checks, demand deposits, and NOW accounts
M2- all of M1 plus near monies.
3 tools of monetary policy
1)Open Market Operations
2)The Reserve Requirement
3)The Discount Rate
near monies
close substitutes for transactions money, such as savings accounts and money market accounts
open market operations
Buy and sell government securities (used the most)
The Reserve Requirement
the percentage the bank has to hold of each deposit. This is money the bank cannot loan out. (least used)
if federal reserve decreases the discount rate and decreases the reserve requirement what will happen to money supply
increase, easy money
what happens when fed sells bonds
decreases money supply
what happens when fed buys bonds
increases money supply
board of governors
Appointed by the President, confirmed by the Senate - their duty is to operate America's banking system.
FOMC
The Federal Open Market Committee;the feds chief monetary policy making body, makes the decisions
Regressive Tax
percentage goes down as income increases.
Proportional Tax
tax percent stays the same
Progressive Tax
percentage goes up as income increases.
What tax is sales tax
regressive
what tax is income tax
progressive
what tax is property
proportional
Commodity money
objects that have value in themselves and that are also used as money; Examples: gold coins, cigarettes in POW camps
Fiat money
Money by government decree; has no alternative value or use as a commodity. example:the us dollar
Representative Money
objects that have value because the holder can exchange them for something else of value.
Sequence of approval for the fed budget
president
congress
president
Federal Advisory Council
a group that consists of 12 members who meet 4x each year with the Board of Governors to discuss the economic situation and policies of the Board
tight money
monetary policy that reduces the money supply
loose money
monetary policy that makes credit inexpensive and abundant, possibly leading to inflation
why member banks borrow money from the Fed
to help the economy control inflation
Fiscal Policy
Government policy that attempts to manage the economy by controlling taxing and spending.
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