Chap 14

Question 1

item of value owned by a firm or an individual

Answer 1

asset

Question 2

a bank’s liabilities can be withdrawn in the short term while its assets are repaid in the long term

Answer 2

asset-liability time mismatch

Question 3

an accounting tool that lists assets and liabilities

Answer 3

balance sheet

Question 4

a bank’s net worth

Answer 4

bank capital

Question 5

literally, trading one good or service for another, without using money

Answer 5

barter

Question 6

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

Answer 6

coins and currency in circulation

Question 7

an item that is used as money, but which also has value from its use as something other than money

Answer 7

commodity money

Question 8

are dollar bills or other currencies with values backed up by gold or another commodity

Answer 8

commodity-back currencies

Question 9

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

Answer 9

credit card

Question 10

like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller

Answer 10

debit card

Question 11

checkable deposit in banks that is available by making a cash withdrawal or writing a check

Answer 11

demand deposit

Question 12

institution that accepts money deposits and then uses these to make loans

Answer 12

depository institution

Question 13

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

Answer 13

diversify

Question 14

a situation in which two people each want some good or service that the other person can provide

Answer 14

double coincidence of wants

Question 15

has no intrinsic value, but is declared by a government to be the legal tender of a country

Answer 15

fiat money

Question 16

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

Answer 16

financial intermediary

Question 17

any amount or debt owed by a firm or an individual

Answer 17

liability

Question 18

a narrow definition of the money supply that includes currency and checking accounts in banks, and to a lesser degree, traveler’s checks

Answer 18

M1 money supply

Question 19

a definition of the money supply that includes everything in M1, but also adds savings deposits, money market funds, and certificates of deposits

Answer 19

M2 money supply

Question 20

whatever is widely accepted as a method of payment

Answer 20

medium of exchange

Question 21

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

Answer 21

money

Question 22

the deposits of many investors are pooled together and invested in a safe way like short-term government bonds

Answer 22

money market fund

Question 23

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

Answer 23

money multiplier formula

Question 24

the excess of the asset value over and above the amount of the liability; total assets minus total liabilities

Answer 24

net worth

Question 25

helps an economy exchange goods and services for money or other financial assets

Answer 25

payment system

Question 26

funds that a bank keeps on hand and that are not loaned out or invested in bonds

Answer 26

reserves

Question 27

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

Answer 27

savings deposit

Question 28

stores a certain value of money on a card and then the card can be used to make purchases

Answer 28

smart card

Question 29

money must also be acceptable to make purchases today that will be paid in the future

Answer 29

standard of deferred payment

Question 30

something that serves as a way of preserving economic value that can be spent or consumed in the future

Answer 30

store of value

Question 31

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”

Answer 31

T-account

Question 32

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

Answer 32

time deposit or certificate of deposit

Question 33

the common way in which market values are measured in an economy

Answer 33

unit of account

Question 34

The costs associated with finding a lender or borrower for money

Answer 34

Transaction costs