Ch5 Flashcards
unit of account
the standard unit for quoting prices
medium of exchange
money is the standard object used in the exchange of goods
store of value
money used to store wealth from one point in time to an- other
fiat money
money that is money by decree of the government
commodity money
an object in use as a medium of exchange, but that object has intrinsic value in alternative (nonmonetary) uses
liquidity
the ease (or how fast) an asset can be converted into cash
M1
- coins and currency in circulation
- checkable deposits
- other deposits
M2
- M1
- saving and time accounts
- Money Market Mutual Funds
reserves
amount of funds deposited at a bank that the bank keeps in cash at the bank (or on account at the Federal Reserve)
fractional reserve banking
a system under which bankers keep as reserves only a fraction of the funds they hold on deposit
required reserves
minimum amount of reserves (in cash or on account at the Federal Reserve) a bank must keep by law
required reserve ratio
proportion (or ratio) of total deposits banks must keep as Required Reserves.
excess reserves
amount of reserves a bank will keep in excess of the amount of their required reserves.
the federal reserve system
the central bank for the U.S
central bank
an institution that manages a country’s currency, money supply, and interest rates. It is also keenly interested in promoting stable prices. A central bank also oversees the commercial banking system within their
country
