Chapter 12: Money, Banking and Money Creation

Card Set Information

Author:
Anonymous
ID:
145457
Filename:
Chapter 12: Money, Banking and Money Creation
Updated:
2012-04-03 11:26:31
Tags:
Money Banking Creation
Folders:

Description:
Chapter 12: Money, Banking and Money Creation
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Anonymous on FreezingBlue Flashcards. What would you like to do?


  1. Define MONEY
    • Acceptable as exchange for goods and services
    • Medium of exchange
  2. Define BARTER
    The exchange of one good or service for another good or service
  3. Define LIQUIDITY
    How quickly you can transform ASSET into CASH
  4. Define MONOTARY POLICY
    Increase & decrease in the supply of money ---> affects interest rates ---> affects Aggregate Demand
  5. What are the 3 FUNCTIONS of MONEY?
    • 1. Medium of Exchange
    • 2. Unit of Account ("common yardstick, unit of meeasurement)
    • 3. Store of Value (an asset for future use)
  6. Define M1
    M1 = currency in circulation + demand deposits

    • Currency in circulation: coins & paper money
    • Demand Deposits: cheques & cards
  7. Define M2
    M2 = M1 + savings & time deposits
  8. Define FRICTIONAL RESERVE BANKING SYSTEM
    • Banking system in which a bank loans out most of its deposits
    • Keeps only a small percentage to meet everyday cash withdrawls
  9. Define PRIME RATE
    The interest rate banks charge to their best corporate customers
  10. Define VAULT CASH
    The currency a bank has in its vault and cash drawers
  11. Define DESIRED RESERVES
    Amount of vault cash a bank keeps on hand for daily transactions
  12. Define DESIRED RESERVE RATIO
    Deposit kept as vault cash
  13. Define EXCESS RESERVES
    Amount by which a bank's actual cash reserves exceed desired reserves

What would you like to do?

Home > Flashcards > Print Preview