Ch 13 - Money and Banks

Question 1

barter

Answer 1

the direct exchange of one good for another, without the use of money

Question 2

money

Answer 2

anything generally accepted as a medium of exchange

Question 3

money supply (M1)

Answer 3

currency held by the public, plus balances in transactions accounts

Question 4

transactions account

Answer 4

a bank account that permits direct payment to a third party, for example, with a check or debit card

Question 5

M2 money supply

Answer 5

M1 plus balances in most savings accounts and money market mutual funds

Question 6

deposit creation

Answer 6

the creation of transactions deposits by bank lending

Question 7

bank reserves

Answer 7

assets held by a bank to fulfill its deposit obligations

Question 8

reserve ration

Answer 8

the ratio of a bank’s reserves to its total transactions; = bank reserves / total deposits

Question 9

required reserves

Answer 9

the minimum amount of reserves a bank is required to hold; = required reserve ratio * transactions deposits

Question 10

excess reserves

Answer 10

bank reserves in excess of required reserves

Question 11

money multiplier

Answer 11

the number of deposit (loan) dollars that the banking system can create from $1 of excess reserves; = 1 / required reserve ratio