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medium of exchange
an item that buyers give to sellers when they want to purchase goods and services
store of value
a means of holding purchasing power over time
unit of account
a means for comparing the values of goods and services
All liquid money (cash, coins, currency, checking acct.)
M1
M2
All of M1 + less immediate (liquid) forms of money to include savings, money market mutual funds, and small denomination time deposits.
demand deposit
the money in checking accounts
Liquidity
the ease with which an asset can be converted into cash
Money Demand
A relationship between the interest rate and the quantity of money that people are willing to hold at any given interest rate.
stock
A share of ownership in a corporation.
bond
a formal contract to repay borrowed money with interest at fixed intervals
time deposit
an account with guaranteed interest for a period of time
bank balance sheet
T account showing assets and liabilities
assets
money and other valuables belonging to an individual or business
Liabilities
debts that you owe
fractional reserve banking
a banking system that keeps only a fraction of funds on hand and lends out the remainder
required reserves
reserves that a bank is legally required to hold, based on its checking account deposits
excess reserves
a bank's reserves over and above its required reserves
federal funds rate
the interest rate at which banks make overnight loans to one another
prime interest rate
the lowest rate charged by a bank for a short-term loan
discount rate
The interest rate on the loans that the Fed makes to banks
open market operations
the purchase and sale of U.S. government bonds by the Fed
1/reserve ratio
money multiplier
nominal interest rate
the interest rate actually paid for a loan
real interest rate
the interest rate corrected for the effects of inflation
FDIC
a federally sponsored corporation that insures accounts in national banks and other qualified institutions
velocity of money
the rate at which money changes hands
Present Value of Money
the amount of money you would need to deposit today in order to accumulate a specific amount in the future
Future value of money
How much your money will be worth in the future if you invest it.
Note 
Flashcard (24)