The monetary system (Chapter 10) Flashcards
1
Q
money
A
- the set of assets in an economy that people regularly use to buy goods and services.
2
Q
medium of exchange
A
- items used to buy goods and services
3
Q
share of value
A
- item used to transfer purchasing power for the future
4
Q
unit of account
A
- yardstick used to post prices and record debts
5
Q
commodity money
A
- money has intristic value
6
Q
fiat money
A
- money whose value depends on government order
7
Q
legal tender
A
- anything that by law must be acceptable for purchase by goods and services
8
Q
near money
A
- assets which are a store of value but not a medium of exchange
9
Q
money substitutes
A
- temporary medium of exchange but not a store of value
10
Q
liquidity
A
- ease to which an asset can be converted into a medium of exchange
11
Q
money supply
A
- total stock of money in the economy at any moment
12
Q
central bank
A
- government owned/operated institution that controls money supply
13
Q
financial intermediaries
A
- financial institutions through which savers can indirectly provide funds to borrowers
14
Q
balance sheet
A
- summarizes assets and liabilities
15
Q
assets
A
- items that you have a claim on
16
Q
liabilities
A
- items where someone has a claim against you
17
Q
owners equity
A
= assets - liabilties
18
Q
reserves
A
- deposits that banks have received but have not loaned out
19
Q
100% reserve banking
A
- commercial banks do not influence the money supply
20
Q
fractional reserve bankign
A
- only a fraction of deposits held as reserves
21
Q
reserve ratio (R)
A
- fraction of deposits held as reserves
22
Q
required reserves
A
- pre 1994, in Canada, 10% on demand deposits, 4 % on term deposits
23
Q
bank run
A
- depositors suspect banks to go bankrupt, try and withdraw balance
24
Q
money multiplier (MM)
A
- the amount of money the banking system generates at the end of each $$ reserves
