Ch 14 Flashcards
Medium of Exchange
Is usable for buying and selling goods and services
Unit of Account
A standard unit in which prices can be stated and the value of goods and services can be compared; one of the three functions of money
Store of Value
Enables people to transfer purchasing power from the present to the future
Liquidity
The ease with which it can be converted quickly into the most widely accepted and easily spent form of money, cash, with little or no loss of purchasing power
M1
Two Components: 1) Currency (coins and paper money) in the hands of the public 2) All checkable deposits (all deposits in commercial banks and ‘thrift’ or savings institutions on which checks of any size can be drawn)
Token Money
The face value of any piece of currency is unrelated to its intrinsic value - the value of the physical material (metal or paper and ink) out of which that piece of currency is constructed
Federal Reserve Notes
Paper money issued by the federal reserve system
Checkable Deposits
Any deposit in a commercial bank or thrift institution against which a check may be written
Commercial Banks
the primary depository institution. A firm that engages in the business of banking (accepts deposits, offers checking accounts, and makes loans)
Thrift Institutions
Savings and loan associations, accept the deposits of households and business and then use the funds to finance housing mortgages and to provide other loans
M2
Contains 3 categories of near monies: 1)Savings deposits, including money market deposits accounts 2) Small-denominated (less than $100,000) time deposits, 3) Money Market Mutual Funds held by individuals
Near-Monies
Highly liquid assets that do not function directly or fully as a medium of exchange buy can be readily converted into currency or checkable deposits
Savings Account
A deposit in a commercial bank or thrift institution on which interest payments are received; generally used for saving rather than daily transactions; a component of the M2 money supply
Money Market Deposit Account (MMDA)
an interest-bearing account containing a variety of interest-bearing short-term securities. Minimum balance requirement and a limit on how often a person can withdraw funds
Time Deposits
An interest-earning deposit in a commercial bank or thrift institution that the depositor can withdraw without penalty after the end of a specified