Ch 11 Econ
Terms
undefined, object
copy deck
- double coincidence of wants
- the unlikely coinidence that 2 ppl each have a G or S that the other wants
- unit of account
- the "yardstick" ppl use to poset P and record debts
- store of value
- an item that ppl can use to transfer purchasing power from the present to the future
- wealth
- used to refer to the total of all stores of value including both money and non money assets
- liquidity
- the ease with which an asset can be converted into the economy's MOE
- 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 govt decree
- currency
- the paper bills and coins in the hands of the public
- money stock
- quantity of money circulating in economy
- demand deposits
- balances in the bank acct that depositors can access on demand by writing a check
- federal reserve (fed)
-
central band of USA
-lender of last resort - central bank
- institution used to oversee banking system and regulate quantity of money in economy
- money supply
- the setting of the money supply by policy makers in the central bank
- To increase the money supply
-
-fed buys govt bonds
-this gives the ppl more money on hand - to decrease money supply
-
-Fed sells bonds
-this gives ppl less money on hands - reserves
-
deposits that banks have recieved but have not loaned out
-if banks hold all money in reserves they cant influence money supply - fractional reserve banking
- a banking system in which banks hold only a fraction of deposits as reserves
- reserve ratio
- the fraction of deposits that banks hold as reserves
- when banks hold a fraction of mula in reserve they create _____ but not ______
-
money
wealth - money multiplyer
- the amt of money the banking system generates with each dollar of reserves
- Money Multiplyer=
- 1/ReserveRatio
- open market operations
- the purchase and sale of US govt bonds by the Fed
- reserve requirements
- regulations on the min amt of reserves that banks must hold against deposits
- increase in reserve requirements
-
banks must hold more money in reserves and therefore can loan out less of each dollar deposited
-This incrases reserve ratio, decreases money multiplier, decrease money supply - a decrease in the reserve requirments
-
decreases reserve ratio
increases money multiplier
increases money supply - discount rate
- interest rate on the loans that the fed makes to banks
- increase in discount rate
-
decrease quantity of reserves
decreases money supply - decrease discount rate
-
increases quantity of reserves
increases money suppy - solvent
- assets exceed liabilities
- reserve ratio=
- reserves/deposits
- money supply=
- initial deposits * money multiplier
- total reserves=
- initial deposits