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21 terms

Grissom: Unit 5

Tucker Watts' Flashcards for Ms. Bailey's class.
STUDY
PLAY
Medium of exchange
anything that is generally accepted as a standard of value and a measure of wealth in a particular country or region
Unit of account
a common unit for measuring the value of each good or service
Store of value
an item that people can use to transfer purchasing power from the present to the future
M1
narrowest measure of the money supply that includes all coins and paper bills in circulation, traveler's checks, checking account balances, and balances in credit unions
M2
All of M1 + less immediate (liquid) forms of money to include savings, money market mutual funds, and small denomination time deposits.
Legal Tender
Any kind of money that a creditor must, by law, accept in payment for debts
FOMC
The Federal Open Market Committee is the most powerful committee of the FED, because it makes the decisions that affect the economy as a whole by manipulating the money supply.
Balance Sheet
a financial statement that reports assets, liabilities, and owner's equity on a specific date
Fractional Reserve Banking
a banking system that keeps only a fraction of funds on hand and lends out the remainder
Profit
the amount of money left over after all the costs of production have been paid
Liquidity
being in cash or easily convertible to cash
Federal Funds Rate
the interest rate at which banks make overnight loans to one another
Monetary Policy
policy that involves changing the rate of growth of the money supply in circulation in order to affect the cost and availability of credit
Open Market Operations
the buying and selling of government securities to alter the supply of money
Discount Rate
the rate of interest set by the Federal Reserve that member banks are charged when they borrow money through the Federal Reserve System
Easy Money
the economic condition in which credit is easy to secure
Tight Money
the economic condition in which credit is difficult to secure and interest rates are high
Prime Interest Rate
the interest rate on short-term loans that banks charge their commercial customers with high credit ratings
Velocity of Money
the average number of times each dollar in the money supply is used to purchase goods and services included in GDP
Cyclical Asymmetry
the idea that monetary policy may be more successful in slowing expansions and controlling inflation than in extracting the economy from severe recession
Inflation Targeting
conducting monetary policy so as to commit the central bank to achieving a publicly announced level of inflation