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34 Cards in this Set
- Front
- Back
Money
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Any good that is widely accepted for purposes of exchange and in the repayment of debt.
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Barter
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exchanging goods and services for other goods and services without the use of money.
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Medium of exchange
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Anything that is generally acceptable in exchange for goods and services. A function of money.
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Unit of account
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A common measure in which relative values are expressed. A function of money.
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Store of Value
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The ability of an item to hold value over time. A function of money.
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Double coincidence of wants
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In a barter economy, a requirement that must be met before a trade can be made.
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M1
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Includes currency held outside banks, checkable deposits and traveler's checks.
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Currency
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Coins and paper money.
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Federal Reserve Notes
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Paper money issued by the fed.
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Checkable Deposits
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Deposits on which checks can be written.
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M2
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M1, savings deposits, small-denomination time deposits, money market mutual funds.
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Savings Deposit
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An interest-earning account at a commercial bank or thrift institution. Checks cannot be written from this account.
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Money Market Deposit Account
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An interest-earning account that has a minimum required balance and offer limited check-writing privileges.
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Time Deposit
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An interest-earning deposite with a specified maturity date. Subject to penalities for early withdrawal.
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Money Market Mutual Fund
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An interest-earning account at a mutual fund company. Minumum balance is required and has limited check-writing privileges.
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Fractional Reserve Banking
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A banking arrangement that allows banks to hold reserves equal to only a fraction of their deposit liabilities.
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Federal Reserve System
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-The Fed
-The central bank of the U.S. |
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Reserves
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The sum of bank deposits at the Fed and vault cash.
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Required Reserve Ratio
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-r
-A percentage of each dollar deposited that must be held on reserve (at the Fed or in the bank's vault). |
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Required Reserves
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The minimum amount of reserves a bank must hold against its checkable deposits as mandated by the Fed.
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Excess Reserves
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Any reserves held beyond the required amount. The difference between total reserves and required reserves.
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T-Account
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A simplified balance sheet that shows the changes in a bank's assets and liabilities.
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Simple deposit multiplier
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1/r
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Cash leakage
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Occurs when funds are held as currency instead of being deposited into a checking account.
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Monetary policy
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Changes in the money supploy, or in the rate of change of the money supply, to achiever particular macroeconomic goals.
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Open Market Purchase
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The buying of government securities by the Fed.
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Open Market Sale
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The selling of government securities by the Fed.
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Reserve Requirement
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The rule that specifies the amount of reserves a bank must hold to back up deposits.
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Federal Funds Market
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A market where banks lend reserves to one another, usually for short periods.
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Federal Funds Rate
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The interest rate in the federal funds market
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Discount Rate
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The interest rate the Fed charges depository institutions that borrow reserves from it.
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What happens as a result of an open market purchase/sale?
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Money supply rises/falls.
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What happens as a result of raising/lowering the required reserve ratio?
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Money supply rises/falls
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What happens as a result of lowering/raising the discount rate?
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Money supply rises/falls.
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