Banking & Financial Systems Chapter 4: Money

aggregates

The different measures that are compiled from a collection of data sources by which the money supply is measured.

barter

The exchange of one good or service for another good or service.

coincidence of wants

Occurs when two people each want what the other has to offer.

commodity

Anything that is useful or has value

commodity money

Something of perceived value used as payment for something else of perceived value.

counterfeit

A copy of something represented as the real thing

denomination

The unit in which money is available

divisibility

The ability to be broken into smaller units.

excess reserve

The funds available for a bank to loan out after its reserve is met

fiat money

Money that has value because the government says it has value.

fractional reserve system

A system that requires banks and other depository institutions to keep a fraction of their deposits in reserves.

gold-exchange standard

Allowed foreign governments, but not individuals, to redeem US dollars for gold.

gold standard

A system that determines how much gold each paper note represents

inflation

When too much money in the economy results in rising prices

interest rate

A stated cost for the use of borrowed money that is a percentage paid on top of the initial amount.

legal tender

Money that must be accepted for payment of debts or to make purchases

medium of exchange

Anything that is exchanged for goods and services, such as money.

money

Anything of value that is accepted in return for goods or services.

money multiplier effect

The phenomenon that occurs when new deposits increase the money supply by more than the original deposit.

money supply

The total amount of money available in an economy at a given time in

prime rate

The interest rate that banks charge their best customers

representative money

. A bill or coin that can be exchanged for an item of value

reserves

A percentage of the bank’s funds that is kept to ensure that money will be available for customers and is not available for loans; also known as required reserves.

store of value.

Something that can be saved, or stored, to use at a future date.

unit of account.

A common measure of what something is worth.