Econ Test 3 Vocab Flashcards
medium of exchange
an item that buyers give to sellers when they want to purchase goods and services
unit of account
the yardstick people use to post prices and record debts
store of value
an item that people can use to transfer purchasing power from the present to the future
liquidity
the ease with which an asset can be converted into the economy’s medium of exchange
commodity money
money that takes the form of a commodity with intrinsic value
fiat money
money without intrinsic value that is used as money because of government decree
wealth
accumulated life savings
Reserves
Deposits that banks have received but have not load out
money
assets people regularly use to buy goods and services from other people
Fractional reserve banking
A banking system in which banks hold only a fraction of deposits as a reservist
Reserve ratio
The fraction of deposits that banks hold as reserves
Open-market operations
The purchase and sale of US government bonds by the fed
Discount rate
The interest rate on the loans that the fed makes to banks
Quantity theory of money
a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate
Discount rate
Initial rate on loans from fed to banks
Federal funds rate
Initial rate charged by commercial banks on loans to commercial banks