Chapter 5 Flashcards
Money
The stock of assets used for transactions
Three functions of money
As a store of value
As a unit of account
As a medium of exchange
Store of value
A way of transferring purchasing power from the present to the future; one of the functions of money
Unit of account
The measure in which prices and other accounting records are recorded; one of the functions of money
Medium of exchange
An item widely accepted in transactions for goods and services; one of the functions of money
Fiat money
Money that is not intrinsically useful and is only valued because it is used as money
Commodity money
Money that is intrinsically useful and would be valued even if it did not serve as money
Gold standard
A monetary system in which gold serves as money or in which all money is convertible into gold at a fixed rate
Currency
The sum of outstanding paper money and coins
Demand deposits
Assets that are held in banks and can be used on demand to make transactions, such as checking accounts
Money supply
The amount of money available, usually as determined by the central bank and the banking system
Monetary policy
The central bank’s choices regarding the supply of money
Central bank
The institution responsible for the conduct of monetary policy in a country or region
Federal Reserve
The central bank of the United States
Open-market operations
The purchase or sale of government bonds by the central bank for the purpose of increasing or decreasing the money supply
