Modules 24-26 Flashcards
Of some current amount of money is the amount to which it will grow as interest accumulates over a specified time period.
Future amount
Of $1 realized from now is 1(1+r) = the amount of money you must lend out today in order to have $1 in one year. It is the value to you today of $1 realized one year from now.
Present value
Of a project is the present value of current and future benefits minus the present value of current and future costs
Net present value
A tool for analyzing a business’s financial position by showing, in a single table, the business’s assets (on the left) and liabilities (on the right)
T-account
The fraction of bank deposits that a bank holds as reserves
Reserve ratio
The smallest fraction of deposits that the Federal Reserve allows banks to hold
Required reserve ratio
A phenomenon in which many of a bank’s depositors try to withdraw their funds due to fears of a bank failure
Bank run
Guarantees that a bank’s depositors will be paid even if the bank can’t come up with the funds to a maximum amount per account
Deposit insurance
The rules set by the Federal Reserve that determine the required reserve ratio for banks
Reserve requirements
Channel through which the Federal Reserve lends money to banks
Discount window
Bank’s reserves over and above its required reserves
Excess reserves
The sum of currency in circulation and bank reserves
Monetary base
The ratio of money supply to the monetary base, it indicates the total number of dollars created in the banking system by each $1 addition to the monetary base
Money multiplier
An institution that oversees and regulates the banking system and controls the monetary base
Central bank
Accepts deposits and is covered by deposit insurance
Commercial bank
