Chapter 17 Vocabulary

Question 1

any genarally accepted means of payment

Answer 1

money

Question 2

checkable deposits + currency

Answer 2

M1

Question 3

M1 + savings deposits + small time deposits + money market mutual funds

Answer 3

M2

Question 4

ta measure in which prices are quoted

Answer 4

unit of account

Question 5

what people trade for goods and services

Answer 5

medium of exchange

Question 6

a means for holding wealth

Answer 6

store of value

Question 7

the use of an actual good for money

Answer 7

commodity money

Question 8

money you can exchange for a commodity at a fixed rate

Answer 8

commodity backed money

Question 9

coins and bills

Answer 9

currency

Question 10

money with no value except as the medium of exchange

Answer 10

fiat money

Question 11

items the firm owns

Answer 11

assets

Question 12

financial obligations the firm owes to others

Answer 12

liabilities

Question 13

an accounting statement that summarizes a firm’s key financial information

Answer 13

balance sheet

Question 14

many depositors attempt to withdraw their funds from a bank at the same time

Answer 14

bank run

Question 15

occurs when there is no commonly accepted medium of exchange

Answer 15

barter

Question 16

each party in exchange transaction happens to have what the other party desires

Answer 16

double coincidence of wants

Question 17

deposits in bank accounts from which depositors may make withdrawals by writing check

Answer 17

checkable deposits

Question 18

when banks hold only a fraction of deposits on reserve

Answer 18

fractional reserve banking

Question 19

the portion of bank deposits set aside and not loaned out

Answer 19

reserves

Question 20

the portion of deposits that banks are requires to keep on reserve

Answer 20

required reserve ratio

Question 21

the interest rate on the discount loans made from the FED to private banks

Answer 21

discount rate

Question 22

deposits that private banks hold on reserve at the FED

Answer 22

federal funds

Question 23

the interest rate that banks change each other on interbank loans

Answer 23

federal funds rate

Question 24

involves the purchase or sale of bonds by a central bank

Answer 24

open market operations

Question 25

the central bank buys longer-term treasury securities and other types of securities (targeting certain markets)

Answer 25

quantitative easing