Chapters 1-3 Flashcards
(28 cards)
Economist and policy makers are particularly concerned about the risk and potential failure this face because they play a vital role in the financial system.
Financial Institutions
A key factor in producing high economic growth.
Financial Markets
These are what make financial market work. Without them, financial markets would not able to move funds from people who save to people who have productive investment opportunities.
Financial Institutions
are financial intermediaries that acquire funds by issuing liabilities and in turn use those funds to acquire assets by purchasing securities or making loan.
Financial Institutions
they reduce transaction costs. allow sharing and solve problems created by adverse relation and moral hazard.
Financial Institutions
any item or commodity that is generally accepted as means of payment for goods and services or for repayment of debt, and that serves as an asset to its holder.
Money
is the central bank in the US that issues currency, determines how much of it is in circulation, and decides how much interest it will charge banks to borrow its money.
The Federal Reserve known as “The Fed”
the central bank that controls the country’s economy in the Philippines.
Bangko Sentral ng Pilipinas
Money is not money unless it has all of the following characteristics:
Money must have value, be durable, portable, uniform, divisible, in limited supply, and be usable as means of exchange
People can store their wealth for future use. Thus, it must not be perishable
Store of value
Most money originally has intrinsic value.
Item of worth
It must be possible to exchange money freely and widely for goods, and its value should be as stable as possible.
Means of exchange
Money can be used to record wealth possessed, traded or spent-personally and nationally.
Unit of account
Money can facilitate exchange at a given point by providing a medium of exchange and unit of account.
Standard of Deferred Payment
the direct exchange of goods
Barter
Advantages of Barter
- Trading relationship
- Physical goods are exchanged
Disadvantages of Barter
- Market needed
- Hard to establish a set value on items
- Goods may not be easily divisible
- Large-scale transactions can be difficult
The narrowest measure of the money supply and refers primarily to money used as a medium of exchange.
M1
This measure includes money held in savings deposits, money market deposit accounts, noninstitutional money market mutual funds and other short-term money market assets
M2
refers primarily to money used as a store of value
M2
refers primarily to money used as a unit of account
M3
this measure includes liquid and near-liquid assets
L
responsible for determining the supply of money and uses daily open market operations to influence the creation of money by banks and to guide the availability of money in the economy.
Bangko Sentral ng Pilipinas
Sources of the Demand for Money
- Transaction demand
- Precautionary demand
- Speculative demand
