44 Flashcards
(18 cards)
Functions of money
Medium of exchange
Store of value
Unit of account
Characteristics of money
Generally acceptable
Recognisable
Portable
Divisible
Homogenous
Narrow money
Money used as medium of exchange and consists of notes in circulation and cash held in banks and balances in commercial banks at central banks
Broad money
Money used for spending and saving
Money supply
total amount of money in an economy
Quantity theory
Theory that links inflation in an economy to changes in money supply
Fisher equation MV=PT
What do commercial banks provide
Demand Deposit accounts
Savings deposit accounts
Equities
Shares in firms
Overdraft
Permission to spend more than is in a demand deposit account
Loan
Sum of money lent at an agreed interest rate
Reserve ratio
Proportion of liquid assets to total liabilities
Capital ratio
Banks available financial capital as a percentage of its riskier assets
Liquidity
The ability to turn an asset into cash quickly without loss
Bank credit multiplier
Process by which banks can make more loans than deposits available
BCM calc
Value of assets created over Value of change in liquid assets
100over liquidity ratio
Quantitative easing
Central bank buy gov securities and private in order to increase money supply and increase eco activity
Total currency flown
Net amount of money that flows in our country as a result of international transactions
