Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

ECON 5311: Foundations in Economics > Chapter 9: Money > Flashcards

Chapter 9: Money Flashcards

(63 cards)

Start Studying
1
Q

money

A

any item that both buyers and sellers will generally accept in exchange for goods and services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

medium of exchange

A

any item used to facilitate trade between buyers and sellers; one of the functions of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

unit of account

A

a measurement unit that allows buyers and sellers to easily compare the value of different goods, services, and resources; one of the functions of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

store of value

A

a characteristic of certain assets that enables them to transfer wealth from the present into the future; one of the functions of money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what are the 3 functions of money?

A
  1. medium of exchange 2. unit of account 3. store of value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

liquidity

A

the degree to which an asset can be readily converted into currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

currency

A

physical units of money such as cash and coins

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

demand deposits

A

money held in an account that can be converted to currency on demand (AKA checking account balances, checkable deposits)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

traveler’s check

A

a certificate, or check that can be converted to currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

M1

A

the most liquid measure of money supply (i.e. demand deposits, traveler’s checks, currency, and other checkable deposits)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

M2

A

a broader measure of money supply that includes M1 (i.e. savings deposits, small-denomination time deposits, money market mutual funds)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

time deposit

A

money held in an account that cannot be converted to currency without penalty before a specified time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

money market mutual fund

A

a demand deposit that accepts deposits and purchases short-term bonds and commercial debt in order to pay interest on the deposited funds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

equation of exchange

A

M (money supply) x V (Velocity) = P (Price Level) x Y(Real GDP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

nominal variables

A

variables measured in monetary units or prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

real variables

A

variables measured in numerical units or units of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

classical dichotomy

A

the idea that real variable such as employment and output are independent from nominal variables like money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

velocity of money

A

the number of times on average and in a given time period that each dollar in a nation’s money supply is used to make purchases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

nominal expenditures

A

P(price level) x Y(real GDP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

real expenditures

A

M(money supply) x V(velocity)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Federal Reserve System

A

the central bank of the US, consisting of 12 regional banks and the Board of Governors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What does The Fed do? (functions)

A
  1. conduct monetary policy
  2. supervises and regulates banks
  3. provides financial services to the US government
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Federal Reserve Board / Board of Governors

A
  1. the governing organization of The Fed
  2. members appointed by the US president and confirmed by the Senate
  3. serve 14 years
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Federal Open Market Committee (FOMC)

A
  1. a committee of The Fed that is responsible for monetary policy decisions specifically for open market operations for The Fed
  2. Federal Reserve board + president of the NY Fed + 4 of the 11 other regional presidents
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
central bank
a bank that provides financial services to a country's government and is responsible for the nation's monetary policy (for the US it's The Fed)
26
monetary policy
the actions taken by a country's central bank to influence the supply of money and credit in the economy
27
open market operations
the purchase or sale of government securities by a central bank; used to influence the money supply and interest rates
28
discount rate
interest rate at which banks can borrow money directly from the Federal Reserve
29
reserve requirement (rr)
the fraction of checkable deposits that banks must keep on hand as reserves either as currency or on deposit with Federal Reserve
30
monetary policy tools
1. open market operations 2. discount rate 3. reserve requirement
31
excess reserves
amount of reserves that a bank can lend out to earn interest; = total reserves - required reserves
32
required reserves
amount of reserves that a bank must keep on hand to meet regulatory requirements = deposits x rr(reserve requirement)
33
total reserves
total amount of reserves that a bank has; | = required reserves + excess reserves
34
asset
any item of value that is owned by an individual or corporation
35
liability
a monetary debt or obligation
36
balance sheet
a statement of assets, liabilities, and net worth
37
fractional reserve banking
a banking system in which banks have to keep only a fraction of checkable deposit on hand and available for withdrawal
38
money mulitplier
the amount by which $1 change in reserves will change the money supply =1/rr
39
change in money supply
1 / rr x changes in reserves
40
interest
a fee for the use of money over time; payment made to lender
41
interest rate
payment made to agents that lend or save money expressed as an annual percentage of monetary amount lent or saved (AKA price of money; nominal interest rate); PRICE OF MONEY
42
money market
a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances
43
transaction demand
the demand for money to be used in daily transactions
44
asset demand
the demand for money to be saved for future use
45
money demand
the relationship between the interest rate and the quantity of money demanded all else held constant; the sum of the transaction demand and asset demand for money
46
money supply
the relationship between the interest rate and the quantity of money supplied in an economy; usually a given value; in the US, M=M2
47
money supply curve
a graphical representation of money supply
48
surplus
quantity supplied is greater than quantity demanded
49
shortage
quantity demanded is greater than quantity supplied
50
determinants of money demand
transaction demand | asset demand
51
determinants for money supply
changes in rr changes in excess reserves changes in willingness to lend
52
yield
the effective interest rate earned on a bond or another asset yield = net profit earned / amount invested
53
bond
a financial agreement that obligates a borrower to repay the amount borrowed and interest on a specific date in the future
54
bond market
financial market in which participants can buy and sell new bounds or trade bonds already in circulation
55
supply of bonds
the relationship between the interest rate and the quantity of bonds supplied in an economy all else held constant
56
demand for bonds
the relationship between the interest rate and the quantity of bonds demanded in an economy all else held constant
57
face value
nominal or dollar value of a security; generally printed on the face of the security; for bonds it's the amount paid to the bondholder when repaid
58
coupon rate
interest rate stated on a bond, as a percentage of the bond's face value
59
bond yield
interest payment / bond cost
60
real interest rate
interest rate paid to lenders and savers when the expected rate of inflation equals zero
61
expected inflation
rate of inflation anticipated by market participants (phi^e)
62
fisher equation
w/out inflation i (nominal interest rate) = r (real interest rate) w/inflation i = r + expected inflation
63
A bond specifies the following terms:
1. length/term of maturity 2. interest paid/interest rate/coupon rate 3. face value/dollar amount returned at expiration

ECON 5311: Foundations in Economics (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions