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Money and Banking Ch 3 Terms

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commodity money
money whose value is determined by its value as a material such as the value of gold used in jewelry; also called full-bodied money
Divisia monetary aggregate
a weighted average of the components of M1, M2, and M3, with the weights depending on the interest rates of the accounts
fiat money
money has value mainly because the government decrees that it has value for payment of taxes
hyperinflation
a very high rate of inflation, often taken to be 50 percent per month (13,000 percent per year) or higher
insider money
money that is created in the private sectory
legal tender
the condition that a lender must accept money in the repayment of debts, by law
liquidity
how easy it is to buy or sell a security in the secondary market where you want to without incurring significant costs; how quickly and easily a type of money can be used to purchase goods and services
M1
the federal reserve's measure of money consisting of coins, paper currency, amounts in checking accounts, and traveler's checks
M2
the federal reserve's measure of money consisting of M1 plus amounts in savings accounts, money-market mutual funds (held by individuals), and small time deposits (under $100,000)
medium of exchange
the function that money serves when people exchange money for goods and services
monetary aggregate
a measure of the total supply of money in the economy
MZM
money with zee maturity, which consists of M2 minus small time deposits plus institutional MMFs
outside money
money created by the government or by nature, not by groups or institutions in the private sector
payment system
the mechanisms by which cash, checks, and electronic payments flow from buyers to sellers; equivalently, the set of mechanisms used for making transactions
standard of deferred payment
the function that money serves when people buy something one day and pay for it later, and the repayment is denoted in terms of money
store of value
the function that money serves when people keep money for some period instead of spending it or investing it
transaction costs
costs of trading, such as time spent shopping and negotiating
unit of account
the function that money serves when prices are denoted in terms of money