| A | B |
|---|
| Money | Anything that serves as a medium of exchange |
| Medium of exchange | Anything that is widely accepted as a means of payment |
| Barter | When goods are exchanged directly for other goods |
| Unit of Account | A consistent means of measuring the value of things |
| Store of Value | An item that holds value over time |
| Commodity money | Money that has value apart from its use as money |
| Fiat money | Money that has some authority genarally a government, has ordered to be accepted as a medium of exchange |
| Currency | Paper money and coins |
| Checkable deposits | Balances in checking accounts |
| Check/Debit | A written order to a bank to transfer ownership of a checkable deposit |
| Money supply | The total quantity of money in the economy at any one time |
| Liquidity | The ease with which an asset can be converted into currency |
| M1 Money | The narrowest of the FEDs money supply definitions that includes currency in circulation, checkable deposits, and travelers checks |
| M2 Money | A broader measure of the money supply than M1 that includes M1 and other deposits. Large deposits, money market mutual funds, real estate, savings accounts, etc. |
| Financial intermediary | An institution that amasses runs form one group and makes them available to another. |
| bank | A financial intermediary that accepts deposits, makes loans, and offers checking accounts. |
| Balance sheet | A financial statement showing assets, liabilities, and net worth. |
| Assets | Anything that has value |
| Liabilities | Obligations to other parties |
| Net worth | Assets minus liabilities |
| Reserves | Bank assets held as cash in vaults and in deposits with the FED Reserve. |
| Fractional reserve banking system | A system in which banks hold reserves whose value is less than the sum of claims outstanding on those reserves. |
| Required reserves | The quantity of reserves banks are required to hold by the FED. |
| Required reserve ratio | The ratio of reserves to checkable deposits a bank must maintain. |
| Excess reserves | Reserves in excess of the required level by the FED. |
| Loaned up | When a banks excess reserves equal zero or have been loaned out. |
| Central Bank | A bank that acts as a banker to the central government, acts as a banker to banks, acts as a regulator of banks, conducts monetary policy and supports the financial system. |
| Discount rate | The interest rate charged by the FED when it lends reserves to banks |
| Federal funds market | A market in which banks lend reserves to one another |
| Federal funds rate | The rate of interest charged when one bank lends to another |
| Bond | A promise by the issuer of the bond to pay the owner of the bond a payment on a specific date |
| Open-market operations | Th buying and selling of Federal government bonds by the FED. |
| Financial markets | Markets in which funds accumulated by one group are made available to another group |
| Face value | The amount the issuer of a bond will have to pay on the maturity date. |
| Maturity date | The date when a bond matures or comes due. |
| Interest rate | Payment made for the use of money, expressed as a percentage of the amount borrowed |
| Foreign exchange markets | A market in which currencies of different countries are traded for one another |
| Demand for money | The relationship between the quantity of money people want to hold Ned the factors that determine that quantity. |
| Transactions demand | Money held to pay for goods and services they want to buy. |
| Precautionary demand | Money held to pay for contingencies |
| Speculative demand | Money held in response to concerns that bond and stock prices might change. |
| Demand Curve for Money | Shows the quantity of money demanded at each interest rate, all things unchanged. |
| Facts of Money Demand | Change in Price Level, Household income/rGDP, Expectations of markets, Transfer costs, Technology |
| Supply Curve of Money | Shows the relationship between the Quantity of money supplied and interest rate (equilibrium of the market), No direct relationship exists between actual supply and interest rate. |
| Federal Reserve Act | Created the Federal Reserve System in 1913. |
| Glass-Steagall Act | Created FDIC and separated investment banking from commercial banking |
| Monetary policy | The FED or government setting and adjusting the money supply. |
| Supply Shifters of Money | Setting the Reserve requirements, Adjusting the Discount rate, and taking part in Open-market operations. |
| Dodd-Frank Act | Put back into place protections from investment banking and regulated the credit and real estate markets. |
| Expansionary policy | Using monetary policy to shift the AD curve to the right, inflation is always a concern with this policy. |
| Contractionary policy | Shifting the AD curve to the left to slow down the economy and curb inflation. |
| Recognition lag | The time it takes when there is a economic issue and when policy makers are aware of it. |
| Implementation lag | The time it takes when a problem is recognized and policy is enacted to deal with it. |
| Impact lag | The amount of time it takes policy to have an effect on the economy. |
