Chapter 12 Flashcards
Inflation does the greatest harm to money’s function as a
Store of value
Barter implies that
To get one good or service, an individual offers another
Money is defined by economists as
Any good that is widely accepted in exchange and for the repayment of debts
Total bank reserves equal
Banks deposits at the federal reserve + vault cash
M2 is comprised of
M1 + small-denomination time deposits + saving deposits + retail money market mutual funds
M1 is comprised of
Currency held outside banks + travelers checks + check able deposits
Reserves are
- Equal to required reserves plus excess reserves
- Equal to vault cash plus bank deposits at the federal reserve
- An asset to banks
Fractional reserve banking is
Banks holding reserves equal to only a fraction of their deposit liabilities
Money _________ transaction costs, making transactions _________ time-consuming
Reduces;less
When banks must hold a percentage of their total deposits in reserve form….
Means banks must hold a fraction of their customers’ deposits either as bank deposits at the federal reserve, vault cash, or both
The potential buyer of a house has less information about the house than the seller of the house. This is a case of
Asymmetric information
If reserves equal $59 million and vault cash equals $29 million, it follows that
Bank deposits at the federal reserve equal $30 million
If check able deposits in Bank A total $520 million and the required reserve ratio is 10 percent, then the required reserves at Bank A equal
52 million
Excess reserves=
Total reserves - required reserves
