Chapter 17 Vocabulary Flashcards
any genarally accepted means of payment
money
checkable deposits + currency
M1
M1 + savings deposits + small time deposits + money market mutual funds
M2
ta measure in which prices are quoted
unit of account
what people trade for goods and services
medium of exchange
a means for holding wealth
store of value
the use of an actual good for money
commodity money
money you can exchange for a commodity at a fixed rate
commodity backed money
coins and bills
currency
money with no value except as the medium of exchange
fiat money
items the firm owns
assets
financial obligations the firm owes to others
liabilities
an accounting statement that summarizes a firm’s key financial information
balance sheet
many depositors attempt to withdraw their funds from a bank at the same time
bank run
occurs when there is no commonly accepted medium of exchange
barter
each party in exchange transaction happens to have what the other party desires
double coincidence of wants
deposits in bank accounts from which depositors may make withdrawals by writing check
checkable deposits
when banks hold only a fraction of deposits on reserve
fractional reserve banking
the portion of bank deposits set aside and not loaned out
reserves
the portion of deposits that banks are requires to keep on reserve
required reserve ratio
the interest rate on the discount loans made from the FED to private banks
discount rate
deposits that private banks hold on reserve at the FED
federal funds
the interest rate that banks change each other on interbank loans
federal funds rate
involves the purchase or sale of bonds by a central bank
open market operations
the central bank buys longer-term treasury securities and other types of securities (targeting certain markets)
quantitative easing
