Chap 13 Flashcards
Barter?
direct exchange of one good for another, without the use of money
ex. I give you bread for eggs
money?
anything generally accepted as a medium of exchange
money supply (M1) and what is it?
cash, coins, and demand deposits or checkings accounts
- these are the most liquid form - meaning you can automatially conduct a transaction with it
transactions account?
bank account that allows direct payment to a third party
ex. with a check or debit card
M2 money supply and other forms of accounts?
M2- slightly less liuid, contains M1 plus other kinds of accounts
- various kinds of savings accounts, money makret mutual funds, CD’s
T accounts?
accounting ledgers used by banks to track assets and liabilities ex. thin about literal T charts he made on board in class comparing the two
banks reserves?
assets held by a bak to fulfill its deposit obligations
reserve ratio?
portion of depositors’ balances that banks must have on hand as cash.
required reserves?
minimum amount of reserves a bank is required to hold
excess reserves?
bank reserves in excess of required reserves?
what happens when a bank has excess reserves and they are not lending it out?
they are not maximizing ability to multiply money
money multiplier?
the amount of money that banks generate with each dollar of reserves.
what is money multiplier equation?
1 divided by required reserve ratio
what does M1 include?
currency in circulation, transactions account balances, traveler’s checks
a bank may lend out?
an amount equal to its excess reserves and no more
