Society uses monetary units—dollars, in the United States—as a yardstick for measuring the relative worth of a wide variety of goods, services, and resources
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Store of value
Enables people to transfer purchasing power from the present to the future
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Liquidity
The ease with which an asset can be converted quickly into the most widely accepted and easily spent form of money, cash, with little or no loss of purchasing power
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M1
Currency (coins and paper money) in the hands of the public and all checkable deposits (all deposits in commercial banks and “thrift” or savings institutions on which checks of any size can be drawn)
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Federal Reserve Notes
Paper money issued by the Federal Reserve System (the U.S. central bank)
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Token money
The face value of any piece of currency is unrelated to its intrinsic value—the value of the physical material (metal or paper and ink) out of which that piece of currency is constructed
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Checkable deposits
A way to transfer the ownership of deposits in banks and other financial institutions
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Runaway inflation
________ may significantly depreciate the value of money between the time it is received and the time it is spent.
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Commercial banks
Accept the deposits of households and businesses, keep the money safe until it is demanded via checks, and in the meantime use it to make available a wide variety of loans
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amount a dollar
The ________ will buy varies inversely with the price level.
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Thrift institutions
Savings and loan associations (S&Ls), mutual savings banks, and credit unions
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Near-monies
Certain highly liquid financial assets that do not function directly or fully as a medium of exchange but can be readily converted into currency or checkable deposits
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Money market deposit account (MMDA)
An interest-bearing account containing a variety of interest-bearing short-term securities
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Time deposits
Funds become available at their maturity
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Medium of exchange
Usable for buying and selling goods and services
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Unit of account
Society uses monetary units-dollars, in the United States-as a yardstick for measuring the relative worth of a wide variety of goods, services, and resources
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Store of value
Enables people to transfer purchasing power from the present to the future
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Liquidity
The ease with which an asset can be converted quickly into the most widely accepted and easily spent form of money, cash, with little or no loss of purchasing power
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20
M1
Currency (coins and paper money) in the hands of the public and all checkable deposits (all deposits in commercial banks and "thrift" or savings institutions on which checks of any size can be drawn)
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Federal Reserve Notes
Paper money issued by the Federal Reserve System (the U.S. central bank
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22
Token money
The face value of any piece of currency is unrelated to its intrinsic value-the value of the physical material (metal or paper and ink) out of which that piece of currency is constructed
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Checkable deposits
A way to transfer the ownership of deposits in banks and other financial institutions
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Commercial banks
Accept the deposits of households and businesses, keep the money safe until it is demanded via checks, and in the meantime use it to make available a wide variety of loans
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Thrift institutions
Savings and loan associations (S&Ls), mutual savings banks, and credit unions
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Near-monies
Certain highly liquid financial assets that do not function directly or fully as a medium of exchange but can be readily converted into currency or checkable deposits
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Money market deposit account (MMDA)
An interest-bearing account containing a variety of interest-bearing short-term securities
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Time deposits
Funds become available at their maturity
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Money market mutual fund (MMMF)
Mutual fund companies use the combined funds of individual shareholders to buy interest-bearing short-term credit instruments such as certificates of deposit and U.S. government securities
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Acceptability
Currency and checkable deposits are money because people accept them as money
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Legal tender
Paper money is a valid and legal means of payment of any debt that was contracted in dollars
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Federal Reserve System
Directs the activities of the 12 Federal Reserve Banks, which in turn control the lending activity of the nations banks and thrift institutions
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Board of Governors
Central authority of the U.S. money and banking system
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Federal Reserve Banks
Blend private and public control, collectively serving as the nations central bank
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Federal Open Market Committee (FOMC)
Aids the Board of Governors in conducting monetary policy
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Electronic payments
Used to replace currency and checks to buy products, pay bills, pay income taxes, transfer bank funds, and handle recurring mortgage and utility payments
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Money market mutual fund (MMMF)
Mutual fund companies use the combined funds of individual shareholders to buy interest-bearing short-term credit instruments such as certificates of deposit and U.S. government securities
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Legal tender
Paper money is a valid and legal means of payment of any debt that was contracted in dollars
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Federal Reserve System
Directs the activities of the 12 Federal Reserve Banks, which in turn control the lending activity of the nation’s banks and thrift institutions
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40
Board of Governors
Central authority of the U.S. money and banking system
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41
Federal Reserve Banks
Blend private and public control, collectively serving as the nation’s central bank
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42
Federal Open Market Committee (FOMC)
Aids the Board of Governors in conducting monetary policy
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Electronic payments
Used to replace currency and checks to buy products, pay bills, pay income taxes, transfer bank funds, and handle recurring mortgage and utility payments
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