Econ 1020 U4 Monetary Policy

Money

Asset that is generally accepted in payment for g/s or the repayment of debts

Income

Flow of earnings overtime

Wealth (net worth)

Value of assets minus value of liabilities

Barter

Direct exchange of g/s for other g/s

Transaction costs

Costs (in terms of time & resources) that are incurred in the process of negotiating and carrying out an exchange of goods

Medium of exchange

Something people accept as payment for g/s

Unit of account

Yardstick people use to post prices and record revenues, costs, profits, & debt

Store of value

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

Liquidity

Ability of an asset to be converted into cash quickly and without a loss of value. Ex: Real assets: Buildings, land, commodities, etc. Financial assets: bonds, stocks, etc

Money supply aggregate

An overall measure of money supply

Currency in circulation

Paper bills and coins in the hands of the non-banking public

Demand deposits

Balances in bank accounts that depositors can access on demand. Ex: Checking accounts

Money supply M1

Currency and currency substitutes

Money supply M2

M1 and some of relatively less liquid assets

Small-denomination time deposits

Time deposits in mounts of less than $100,000

Commercial banks

Financial institutions that offer a wide range of services to customers such as checking accounts, savings accounts, and loans

Savings and loan associations

Financial institutions that historically accepted deposits in exchange for shares that paid dividends and used deposits to make mortgage loans. They now offer the same services as banks

Credit unions

Financial cooperative organizations that accept deposits from members and lend money to members