credit, banks and money Flashcards
money d
medium of exchange used to purchase goods and services
wealth d
stock of things owned and the value of that stock
income d
amount of profit, interest, rent, labour earnings and other payments received in a time period
think about the consumption now and latter graph
x=consumption now,
y=consumption later,
can have 100 later so goes through 100 and then depending on the interest rate it is a doenward sloping line
interest rate d
price of borrowing or the reward for saving
equation for how much money you have to pay back
70 + 70r = 70(1+r)
diminishing marginal returns to consumption d
value to the individual of an additional unit of consumption declines, the more consumption the individual has
pure impatience d
characteristic of a person who values an additional unit of consumption now, over an additional unit later when the amount of consumption is the same
discount rate d
how much the person values an additional unit of consumption now over an additional unit of consumption later (denoted with rho)
reservation indifference curve d
curve along which all the points are as highly valued as ones reservation option
how is the consumption now and later graph different when he is lending
110 later y,
100 now x,
what point will he choose on the consumption now and later graphs
where mrs=mrt,
plot indifference curves and then where the indifference curve is a tangent
central bank d
only bank that can create a country’s legal tender,
usually owned by the government
bank run d
where depositors withdraw funds from a bank because of fear that it may go bankrupt and not honour its liabilities
principal agent problem d
when one party would like another party to act in some way and that cannot be enforced
