CLEP Macroeconomics Unit 3 Key Terms & Concepts

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laurettaloo22
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CLEP Macroeconomics Unit 3 Key Terms & Concepts
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2011-11-28 20:08:21
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unit 3 key terms and concepts
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  1. barter
    exchanging 1 good for another of similar value
  2. money
    a means of exchange
  3. fiat money
    money that isn't backed by up anything (USA since 1972)
  4. currency
    system of money in a particular country
  5. liquidity
    flows through the eonomy very easily
  6. M1 Money
    cash, coins, checks, debit cards (can be easily exchanged)
  7. M2 Money
    savings account, certificates of deposits (CDs), savings bond, investments (not as easily exchanged)
  8. M3 Money
    foreign money, timed deposits (retirement fund) NOT LIQUID AT ALL!
  9. velocity of money
    how often a dollar exchanges hands in 1 year
  10. equation of exchange
    quantity of money x money velocity = price x quantity of goods
  11. quantity theory of money
    price level = (money supply x velocity) / (quantity of goods)
  12. transactions demand for money
    the quantity of money demanded by households and businesses to transact their buying and selling of goods and services
  13. fractional reserve system
    bank system that provides people immediate access to their deposits but only allows banks to hold a fraction of these deposits in reserve
  14. balance sheet
    bank's statement of liabilities (what it owes) and assets (what it owns)
  15. legal reserve requirement
    amount banks are required to keep in cash reserves
  16. financial intermediaries
    firms that accept deposits from savers and use those deposits to make loans to borrowers
  17. potential money multiplier
    increase in the money supply that is potentially generated by a change in demand deposits
  18. excess reserves
    quantity of reserves held by a bank in excess of the legally required amount
  19. bank notes
    a note issued by a bank to redeem the note for a specific amount of gold/silver
  20. federal reserve system
    central bank of the United States
  21. The Fed
    federal reserve system
  22. federal open market committee (FOMC)
    the Fed's principal decision-making body
  23. discount rate
    interest rate the Fed charges banks that borrow reserves from it
  24. countercyclical monetary policy
    policy directives used by the Fed to moderate swings in the business cycle
  25. federal funds market
    market in which banks lend and borrow reserves from each other for very short periods of time (usually overnight)
  26. open market operations
    buying and selling of government bonds by the FOMC
  27. federal funds rate
    interest rate on loans made by banks in the federal funds market
  28. margin requirement
    the amount that an investor must deposit in a margin account before buying on margin or selling short

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