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15 Cards in this Set

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demand deposites
- deposits of money held in a bank that can be withdrawn on demand, either by writing a check, or physically going to the bank

offers security
goes to tax records
money market mutual funds
Short term, like T-bills. 3-6 month
Checks, but limited.
Highly liquid near money
dangers of stocks and bonds
Value of these fluctuates - may not be able to recover original purchase price at any point in time.
liquidity
refers to the ease with which an asset can be converted into currency (or other assets).
two types of money supply
M1 - checkable deposits, currency, travelers’ checks.
M2 - M1, plus savings deposits, time deposits, money market mutual funds. (4x size of M1 - bulk of assets held in savings as opposed to transactions accounts)
median of exchange
facilitate exchange through lowering transactions cost.
commercial banks
largest segment of banking industry. Almost all demand deposits, and about half the savings accounts.
savings and loans
original purpose to specialize in consumer loans, especially housing.
Credit unions
cooperatives, where use is commonly restricted to some common affiliation, such as employer, union, etc
reserver requirement
percent of total deposits bank is required to keep in vault
protection from bank failure
reserver requirements a

and secondary reserves
secondary reserves
reserves held in highly liquid form, but which also earn interest, such as U.S. government bonds, held as additional protection.
Bank Balance Sheet
tells bank what it ows and what it is owed

Assets - reserves, loans outstanding, physical buildings. Things the bank owns.
Liabilities - checkable deposits, savings and time deposits, working capital.
Healthy and solvent bank
when assets are greater than liabilities
excess reserves
actual reserves - required reserves.