Chap 14 Flashcards
item of value owned by a firm or an individual
asset
a bank’s liabilities can be withdrawn in the short term while its assets are repaid in the long term
asset-liability time mismatch
an accounting tool that lists assets and liabilities
balance sheet
a bank’s net worth
bank capital
literally, trading one good or service for another, without using money
barter
the coins and bills that circulate in an economy that are not held by the U.S. Treasury, at the Federal Reserve Bank, or in bank vaults
coins and currency in circulation
an item that is used as money, but which also has value from its use as something other than money
commodity money
are dollar bills or other currencies with values backed up by gold or another commodity
commodity-back currencies
immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month the user owes the money to the credit card company; this is a short term loan
credit card
like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller
debit card
checkable deposit in banks that is available by making a cash withdrawal or writing a check
demand deposit
institution that accepts money deposits and then uses these to make loans
depository institution
making loans or investments with a variety of firms, to reduce the risk of being adversely affected by events at one or a few firms
diversify
a situation in which two people each want some good or service that the other person can provide
double coincidence of wants
has no intrinsic value, but is declared by a government to be the legal tender of a country
fiat money
an institution that operates between a saver with financial assets to invest and an entity who will borrow those assets and pay a rate of return
financial intermediary
any amount or debt owed by a firm or an individual
liability
a narrow definition of the money supply that includes currency and checking accounts in banks, and to a lesser degree, traveler’s checks
M1 money supply
a definition of the money supply that includes everything in M1, but also adds savings deposits, money market funds, and certificates of deposits
M2 money supply
whatever is widely accepted as a method of payment
medium of exchange
whatever serves society in four functions: as a medium of exchange, a store of value, a unity of account, and a standard of deferred payment
money
the deposits of many investors are pooled together and invested in a safe way like short-term government bonds
money market fund
total money in the economy divided by the original quantity of money, or change in the total money in the economy divided by a change in the original quantity of money
money multiplier formula
the excess of the asset value over and above the amount of the liability; total assets minus total liabilities
net worth
helps an economy exchange goods and services for money or other financial assets
payment system
funds that a bank keeps on hand and that are not loaned out or invested in bonds
reserves
bank account where you cannot withdraw money by writing a check, but can withdraw the money at a bank-or can transfer it easily to a checking account
savings deposit
stores a certain value of money on a card and then the card can be used to make purchases
smart card
money must also be acceptable to make purchases today that will be paid in the future
standard of deferred payment
something that serves as a way of preserving economic value that can be spent or consumed in the future
store of value
a balance sheet with a two-column format, with the T-shape formed by the vertical line down the middle and the horizontal line under the column headings for “Assets” and “Liabilities”
T-account
account that the depositor has committed to leaving in the bank for a certain period of time, in exchange for a higher rate of interest
time deposit or certificate of deposit
the common way in which market values are measured in an economy
unit of account
The costs associated with finding a lender or borrower for money
Transaction costs
