Ch. 9 Flashcards
Anything that is generally accepted as a means of payment
Money
What are the three principal purposes of money?
One to be a medium of exchange two to provide a measure of value three to provide a store of value
The direct exchange of one good for another good without a standard form of money, passing from hand to hand
Barter
A term that refers to coined metallic money
Specie
To lower the value of a coin
Debase
When people cannot trust the value of a form of money they will save for themselves, forms of money that seem more stable and valuable
Gresham’s Law
The asserted value of money
Face value
When the level of prices in the market rises because too much money is in circulation
Inflation
Price is decreased, because money seems more valuable and stable
Deflation
Any form of money that has been declared a valid means of payment
Legal tender
Gold, silver or platinum usually found in the forms of bars, ingots or plates
Bullion
A system which allows banks to hold less than 100% of deposits in reserve
Fractional reserve banking
Legal tender that is backed by nothing but the governments promise
Fiat money
What are the three main categories of money?
M1, M2, and M3
Value of all balances in various types of transaction accounts, as well as travelers, checks, and all the coins and currency hold outside of banks
M1
