| A | B |
|---|
| Money | Anything which is immediately available and is acceptable in exchange for goods and services |
| Functions of money | Purposes that money can be used for |
| Means of exchange | money can be exchanged (swapped) for goods and services |
| Measure of value | Using money to compare prices |
| Means of deferred payment | money allows people to buy goods on credit |
| Store of value | Money can be saved and used to buy goods later |
| Money supply | The amount of money that is available for use as a medium of exchange |
| Liquidity | The ease with which an asset can be turned into a medium of exchange |
| M1 | Notes and coins held by the public plus transaction account balances |
| M2 | M1 plus other demand deposits not in M1 |
| M3 | M2 plus other depoisits such as term or investment deposits |
| Financial institution (intermediary) | Business which recieves deposits and makes loans |
| Demand Deposit | Bank account which allows money to be withdrawn immediately |
| Transaction account | Bank account which allows money to be withdrawn immediately |
| Electronic Funds Transfer | System that allows money to be transfered electronically from the point of sale (EFTPOS) the bank account of the buyer to the bank account of the lender |
| Financial investment | Deposit in a financial institution or purchase of assets that consist of money |
| Investment | Purchase of new capital goods |
| Investment account | Deposit for a set amount of time |
| Other M3 Financial | Financial institutions that are not registered as banks eg Finance Institutions Companies |
| Share | Part ownership in a company |
| Government security | loan to the Government |
| Registered bank | Financial institution registered as a bank with the Reserve Bank |
| Velocity of circulation | Number of times a given money supply is spent in a given time |
| Quantity theory of money | Theory that states thgat an increase in the money supply causes inflation |
| Monetary policy | Government policy of controlling the money supply to control the economy |
| Indexation | Linking wage increases to the inflation rate |
| Direct controls | Laws which restrict price changes |
| Deflationary policies | policies which reduce the growth in aggregate demand |
| Aggregate Demand | Total demand fro all goods and services in the economy |
| Reserves | Assets held by banks so they can meet the demand for withdrawls |
| Real interest rates | Interest rates adjusted for inflation |
