Chapter 12 Flashcards Preview

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Flashcards in Chapter 12 Deck (14):
1

Inflation does the greatest harm to money's function as a

Store of value

2

Barter implies that

To get one good or service, an individual offers another

3

Money is defined by economists as

Any good that is widely accepted in exchange and for the repayment of debts

4

Total bank reserves equal

Banks deposits at the federal reserve + vault cash

5

M2 is comprised of

M1 + small-denomination time deposits + saving deposits + retail money market mutual funds

6

M1 is comprised of

Currency held outside banks + travelers checks + check able deposits

7

Reserves are

1. Equal to required reserves plus excess reserves

2. Equal to vault cash plus bank deposits at the federal reserve

3. An asset to banks

8

Fractional reserve banking is

Banks holding reserves equal to only a fraction of their deposit liabilities

9

Money _________ transaction costs, making transactions _________ time-consuming

Reduces;less

10

When banks must hold a percentage of their total deposits in reserve form....

Means banks must hold a fraction of their customers' deposits either as bank deposits at the federal reserve, vault cash, or both

11

The potential buyer of a house has less information about the house than the seller of the house. This is a case of

Asymmetric information

12

If reserves equal $59 million and vault cash equals $29 million, it follows that

Bank deposits at the federal reserve equal $30 million

13

If check able deposits in Bank A total $520 million and the required reserve ratio is 10 percent, then the required reserves at Bank A equal

52 million

14

Excess reserves=

Total reserves - required reserves