Macro Chapter 4
Terms in this set (36)
the stock of assets used for transactions , store of value,
Store of Value
A way of transferring purchasing power from present to future; one of the functions of money
Unit of Account
the measure in which prices and other accounting records are recorded; one of the functions of money
Medium of Exachange
The item widely accepted in transaction for goods and services; one of the functions of money
Money that is not intrinsically useful and is valued only because it is used as money
Money that is intrinsically useful and would be valued even if it did not serve as money
a monetary system in which gold serves as money or in which al money is convertible into gold at fixed rate
The amount of money available usually as determined by the central bank and the banking system
the central banks' choice regarding the supply of money
the institution responsible for the conduct of monetary policy, such as the Fed Reserve
The central bank of the US
Open Market Operations
the purchase or sale of government bonds by the central bank for the purpose of increasing or decreasing the money supply
the sum of outstanding paper money and coins
assets that are held in banks and can be used on demand to make transactions such as checking accounts
The money that banks have received from depositors but have not used to make loans
An accounting statement that shows assets and liabilities
Fractional Reserve Banking
a system in which banks keep only some of their deposits on reserve
the resources that bank owner have put into the institutions
the use of borrowed money to supplement existing funds for the purpose of investment
The min amount the central bank is mandated by regulators
the sum of the currency and bank reserves, high powered money
Reserve- Deposit Ration
The ratio of the amount of reserves banks choose to hold to the amount demand deposits they have
the ratio of the amount of currency that people choose to hold to the amount of demand deposits they hold a banks
The increase in the money supply resulting from a one m o
the sum of currency and bank reserves, also called monetary base
The interest rate that the FED charges when it makes loans to bank
regulation that regulates the demand deposit ratio
reserves held by banks above the amount mandated by reserve require
Interest on Reserves
the central bank's policy of payign banks an interest rate for the deposits that they hold as reserves
If the monetary base is denoted by B, rr is the ratio of reserves to deposits, and cr is the ratio of currency to deposits, then the money supply is equal to ______ divided by ______ multiplied by B.
(cr + 1); (cr + rr)
If the ratio of currency to deposits (cr) increases, while the ratio of reserves to deposits (rr) is constant and the monetary base (B) is constant, then:
the money supply decreases.
If there is no currency and the proceeds of all loans are deposited somewhere in the banking system and if rr denotes the reserve-deposit ratio, then the total money supply is:
reserves divided by rr.
Open-market operations change the ______; changes in interest rate paid on reserves change the ______; and changes in the discount rate change the ______.
monetary base; money multiplier; monetary base
The ratio of the money supply to the monetary base is called:
the money multiplier.
To increase the money multiplier, the Fed can:
lower the interest rate paid on reserves.
When the Fed increases the discount rate, it:
is likely to decrease the monetary base (B).