Ch13 - Money And Banking Flashcards
What are the three types of money?
- Commodity (money and other use)
- Commodity backed (exchange for commodity)
- Fiat money (not backed - value from official status)
What are the three functions of money?
- Medium of exchange
- Store of value
- Unit of account.
What are the two money supplies?
M1 - currency + check able deposits
M2 - M1 + near monies (small time dep, money market mut. funds, savings deposits)
What are the 3 motives for holding money?
- Transactions
- Precautionary
- Speculative
The demand for money to finance transactions is called…
Transaction Demand.
Define Asset Demand
The trade between holding money and gaining interest on high rates - opportunity cost of holding money.
What are “Required Reserves”?
The min. ammount the Fed req’s banks to have cash on hand.
Sum of vault cash and deposits at federal reserve.
What are “excess reserves”?
Any reserves the bank has over it’s Required Reserve value.
What is the deposit expansion multiplier (DEM) formula?
1/reserve ratio
Deposit expansion multiplier is similar to what other concept?
Economic (G,C,I) “The Multiplier”.
What two factors reduce the Deposit Expansion multiplier?
Currency drains - outgoing payments limit loanable (excess reserves)
Bank Behavior - (aggressive or conservative)
What are the primary types of banks?
Commercial
Savings and Loan
Mutual Savings
Credit Unions
What was the Glass-Steagall act o 1933?
Prohibited investment banking and commercial banking at the same place.
Established deposit insurance.
What was the deregulation and monetary control act of 1980?
Allowed S&L, mutual savings banks, and CU’s to offer same services as commercial banks.
What is the home mortgage borrower “conventional market”?
Market for those with good credit.
