Econ Test 3 Vocab Flashcards

1
Q

medium of exchange

A

an item that buyers give to sellers when they want to purchase goods and services

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2
Q

unit of account

A

the yardstick people use to post prices and record debts

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3
Q

store of value

A

an item that people can use to transfer purchasing power from the present to the future

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4
Q

liquidity

A

the ease with which an asset can be converted into the economy’s medium of exchange

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5
Q

commodity money

A

money that takes the form of a commodity with intrinsic value

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6
Q

fiat money

A

money without intrinsic value that is used as money because of government decree

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7
Q

wealth

A

accumulated life savings

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8
Q

Reserves

A

Deposits that banks have received but have not load out

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8
Q

money

A

assets people regularly use to buy goods and services from other people

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9
Q

Fractional reserve banking

A

A banking system in which banks hold only a fraction of deposits as a reservist

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10
Q

Reserve ratio

A

The fraction of deposits that banks hold as reserves

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11
Q

Open-market operations

A

The purchase and sale of US government bonds by the fed

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12
Q

Discount rate

A

The interest rate on the loans that the fed makes to banks

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13
Q

Quantity theory of money

A

a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate

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14
Q

Discount rate

A

Initial rate on loans from fed to banks

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15
Q

Federal funds rate

A

Initial rate charged by commercial banks on loans to commercial banks

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16
Q

Required reserve ratio

A

Percent of deposits that must be held as reserves

17
Q

Net capital outflow

A

The purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners

18
Q

Shoeleather costs

A

The resources wasted when inflation encourages people to reduce their money holding

19
Q

Quantity equation

A

The equation mXv=PXY which relates the quantity of money the velocity of money and the dollar value of the economies output of goods and services

20
Q

Change in Fed policy

A

Supply shifter

21
Q

Velocity of money

A

The rate at which money changes hands

22
Q

Capital flows

A

Includes foreign direct investment and foreign portfolio investment

23
Q

Depreciation

A

A decrease in the value of current sea as measured by the amount of foreign currency it can buy

24
Q

Appreciation

A

An increase in the value of the current sea as measured by the amount of foreign currency it can buy

25
Q

Open economy

A

Has dealings with other countries

26
Q

Supply of money

A

M1 as set by the Fed

27
Q

Demand for money

A

Eabow law money so they can buy stuff (conduct transactions)

28
Q

Quantity theory of money

A

In the long run money supply sets prices

29
Q

Menu costs

A

The cost of changing prices

30
Q

Quantitative easing

A

Central bank buys non-government bonds

31
Q

Hyperinflation

A

Period of exploding price level increases (infl greater than or equal to 50% per month)

32
Q

Nominal exchange rate

A

The rate at which a person can trade the currency of one country for the currency of another

33
Q

Feds dual mandate

A

Stable prices and maximum employment

34
Q

Net exports

A

The exports minus the imports

35
Q

Balanced trade

A

Net exports is equal to 0 or exports equals imports

36
Q

Trade surplus

A

Net exports are greater than 0

37
Q

Trade deficit

A

Net exports are less than 0

38
Q

Foreign direct investment

A

Buy/build business abroad and buying significant stocks

39
Q

Foreign portfolio investment

A

Buying financial assets, stocks, bonds, bank accounts

40
Q

Foreign exchange

A

Currency from another country you want so you can buy their stuff

41
Q

Exchange rate

A

The price of one currency in terms of another OR how many units of other currency $1 can buy.