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Money And Banking > Chapter 3 > Flashcards

Chapter 3 Flashcards

0
Q

What is wealth?

A

Total collection of pieces of property that serve to store value

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1
Q

What is currency?

A

Paper coins and money

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2
Q

What is income?

A

Flow of earnings per unit of time

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3
Q

What is a stock?

A

A certain amount given at a point in time

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4
Q

What is money?

A

Anything accepted as a payment for a good or service or in repayment of debt and distinct from income and wealth

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5
Q

What are the functions of money?

A

Medium of exchange
Unit of account
Store of value

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6
Q

What is a medium of exchange?

A

Used to pay for goods or services

Promotes efficiency by minimizing time spent exchanging goods and services

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7
Q

What is a transaction cost?

A

Time spent trying to exchange goods or services

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8
Q

What is a double coincidence of wants?

A

They have to find someone who has a good or service they want and who also wants the food and service they have to offer
Bater community

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9
Q

What is needed for a commodity to function as money?

A 
Must be easily standardized, easy to choose a value
Widely accepted 
Easily divisible, to make change
Easy to carry 
Not deteriorate quickly
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10
Q

What is unit of account?

A

It is used to measure the value of an economy

Barter community
N(N-1) /2
Number of prices

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11
Q

What is a store of value?

A

Repository of purchasing power over time

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12
Q

Why do people keep money?

A

It is liquid

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13
Q

What is liquidity?

A

Relative ease and speed with which an asset can be converted into a medium of exchange

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14
Q

What is the most liquid asset?

A

Money

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15
Q

What is hyperinflation?

A

When inflation rates exceeds 50% per month

Price levels increase rapidly, money losses value rapidly, people are less likely to hold their money in this form

16
Q

What is the payment system?

A

Method of conducting transaction in an economy

17
Q

What is commodity money?

A

Precious metal or valuable commodity

Heavy and hard to transport

18
Q

What is fiat money?

A

Paper currency decreed by governments as legal tender but not convertible to coins or precious metals

Lighter but must have faith in people issuing it

19
Q

What are checks?

A

An instruction to your bank to transfer money for your account to someone else’ account?

20
Q

What are advantages and disadvantages of checks?

A

Advantages-reduce transportation costs, written for large amounts, reduce theft
Disadvantages-takes time for money to transfer, cost a lot of money to process

21
Q

What is electronic payment?

A

Electronics payment of bills

22
Q

What is e-money?

A

Money that exists only in electronic form

Debit cards, stored value card, smart cards, e-cash

23
Q

What is a stored-value card?

A

Purchase a card with a prepaid amount up front

24
Q

What is a smart card?

A

Computer chip that allows it to be loaded with digital cash from bank account whenever needed

25
Q

What is e-cash?

A

Used on Internet to purchase goods or services

26
Q

What is monetary aggregates?

A

Measures of the mommy supply agreed on by the fed

27
Q

What is M1?

A

Includes most liquid assets

Currency, checking account deposits, and travelers checks

28
Q

What is included in he currency component?

A

Only paper money in the nonbank public

29
Q

What is included in travelers check portion?

A

Only travelers checks not issued by banks

30
Q

What is included in the other check able deposits?

A

Mostly interest bearing checking accounts held by households

31
Q

What is NOW?

A

Negotiated order of withdrawl

Pay interest on balances

32
Q

What is ATS?

A

Automatic transfer from savings

Pay interest on their balances

33
Q

What is M2?

A

Assets that are not quite as liquid
Assets with check writing features
Money market deposit accounts, money market mutual funds
Savings deposits
Small denomination time deposits
Less than 100,000 redeemed at a fixed maturity without penalty

34
Q

What are saving deposits?

A

Non-transaction deposits that can be added to or taken out of at anytime

35
Q

What are money market deposit accounts?

A

Similar to money market mutual funds, distributed but the bank

36
Q

What is money market mutual fund?

A

Retail accounts on which households can write checks

Money And Banking (5 decks)

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