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24 Cards in this Set
- Front
- Back
money
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the set of assets in an economy that people regularly use to buy goods and services from other people
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medium of exchange
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an item a buyer gives to sellers when they want to purchase goods and services
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unit of account
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the yardstick people use to post prices and record debts
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store of value
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an item that people can use to transfer purchasing power from the present to the future
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liquidy
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the ease with which an asset can be converted into the economy's medium of exchange
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commodity money
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money that takes the form of a commodity with intrinsic value (aka gold, cigarettes)
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fiat money
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money without intrinsic value that is used as money because of government decree
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money stock
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the quantity of money circulating in the economy
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currency
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paper bills and coins in the hands of the public
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demand deposits
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balances in bank accounts that depositors can access on demand by writing a check (or debit card)
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M1
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-Demand deposits
-travelers checks -currency -other checkable deposits |
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M2
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M1 +
-Savings deposits -Small time deposits -Money market mutual funds -A few minor other categories |
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Federal Reserve (The FED)
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the central bank of the united states
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central bank
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an institution designed to oversee the banking system and regulate the quantity of money in the economy
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organization of the fed?
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7 board of governors, 1 chairman, 14 year terms, approved by president + congress
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monetary policy
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the setting of the money supply by policymakers in the central bank
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organization of the Federal Open Market Commitee (FOMC)?
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the Fed 7 governors + 12 regional bank presidents
only 5 of the regionals get to vote per meeting (this rotates) |
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Federal Reserve's primary tool to help economy?
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open-market operation ... the ability to purchase and sell US Govt Bonds
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reserves
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deposits banks have received but not loaned out
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fractional-reserve banking
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a banking system in which banks hold only a fraction of deposits as reserves
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reserve ratio
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the fraction of deposits the bank holds as reserves
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money multiplier
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the amount of money the banking system generates with each dollar of reserves
a reciprocal of the reserve ratio |
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reserve requirements
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regulations on the minimum amount of reserves that the banks must hold against deposits
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discount rate
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the interest rate on the loans that the Fed makes to banks
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