Exam 3 Notes

Barter economy

An economic system in which goods and services are traded directly for other goods and services without using money.

Fiat money

Paper money that is not backed by a physical commodity, such as gold.

Medium of exchange

A function of money that facilitates easier transactions by acting as an intermediary.

Store of value

A function of money that allows it to maintain its value over time, barring inflation.

Measure of value

A function of money that enables the comparison of the worth of different goods and services.

Standard for future payments

A function of money which establishes a fixed rate for transactions and contracts.

Hard currency

Currency that is made reliable based on a country's economic success, political stability, and transparency.

Soft currency

Currency that is accepted only within a particular country or region and cannot be easily converted to other currencies.

Federal Reserve System (FRS)

The central banking system of the United States, responsible for regulating monetary policy.

Discount Rate

The interest rate charged by central banks to commercial banks for short-term loans.

Prime interest rate

The interest rate that commercial banks charge their most credit-worthy customers.

Quantitative policy

Monetary policy tools used by the FRS to affect the general economy.

Open market operations

The buying and selling of government securities by the FRS to regulate the money supply.

Moral persuasion

A non-binding approach to influence economic behavior, appealing to patriotism.

Underemployment

A situation in which a person with skills or training is working in a job that does not utilize those skills.

Unemployment

The state of being jobless and actively looking for work.

Multinational corporation

An American company with production facilities in multiple countries.

Trade Blocs

Agreements between two or more nations to promote trade among themselves.

NAFTA (North American Free Trade Agreement)

An agreement that established free trade between the United States, Canada, and Mexico.

USMCA (United States-Mexico-Canada Agreement)

The revised trade agreement replacing NAFTA, aimed at facilitating trade between the three countries.