Ch 30: Money, Banking & Fed'l Reserve Value

Question 0

Store of value

Answer 0

A means of holding purchasing power over time

Question 1

Medium of exchange

Answer 1

An asset that individuals acquire for the purpose of trading rather than for their own consumption

Question 2

Unit of account

Answer 2

A measure used to set prices and make economic calculations

Question 3

Commodity money

Answer 3

A good used as a medium of exchange that has other uses

Question 4

Fiat money

Answer 4

Payment with value in its official status

Question 5

Near-moneys

Answer 5

Financial assets that can’t be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits

Question 6

Bank reserves

Answer 6

Currency banks hold in their vaults plus their deposits at the Federal Reserve

Question 7

Reserve ratio

Answer 7

Fraction of bank deposits that a bank hold as reserves

Question 8

Bank run

Answer 8

When many of a bank’s depositors try to withdraw their funds due to fear of a bank failure

Question 9

Deposit insurance

Answer 9

Guarantees that a bank’s depositors will be paid even if the bank can’t come up with the funds, up to a maximum amount per account

Question 10

Reserve requirements

Answer 10

Rules set by the Federal Reserve that determine the minimum reserve ratio for a bank

Question 11

Monetary base

Answer 11

Sum of currency in circulation and bank reserves

Question 12

Money multiplier

Answer 12

Ratio of the money supply to the monetary base

Question 13

Central bank

Answer 13

An institution that oversees and regulates the banking system and controls the military base

Question 14

Federal funds market

Answer 14

Allows banks that fall short of the reserve requirement to borrow funds from banks with excess reserves

Question 15

Discount rate

Answer 15

Rate of interest the Fed charges on loans to banks

Question 16

Open-market operation

Answer 16

Purchase or sale of gov’t debt by the Fed