The Monetary System Flashcards
What is Money
Money is the set of assets in an economy that people regularly use to buy goods and services from other people.
What is the medium of exchange
It is an item that buyers give to sellers when they want to purchase goods and services.
What is the unit of account
It is the yardstick people use to post prices and record debts.
What is the store of value
It is an item that people can use to transfer purchasing power from the present to the future.
What is liquidity
Liquidity is the ease with which an asset can be converted into the economy’s medium of exchange.
What is commodity money
It is the money that takes the form of commodity with intrinsic value.
What is fiat money
It is money without intrinsic value that is used as money because of government decree.
What is Currency
It is the paper bills and coins in the ha nds of the public.
What is money supply
It is the quantity of money available in the economy.
What is monetary policy
It is the setting of the money supply by policymakers in the central bank.
What are reserves
Reserves are deposits that banks have received but have not loaned out.
What is fractional reserve banking
It is a banking system in which banks hold only a fraction of deposits as reserves.
What is reserve ratio
It is the fraction of deposits that banks hold as reserves.
What is the money multiplier
It is the amount of money the banking system generates each dollar of reserves.
What is bank capital
It is the resources a bank owner’s have put into the institution.
