Studied by 2 peopleAsset
A resource with economic value owned by an individual.
nominal intrest rate
interest rate paid actually
Real interest rate
Nominal interest rate - rate of inflation
Money
an asset used to purchase goods and services
Wealth
value of a household's accumulated savings
Loans
a leading agreement between an individual lender and an individual borrower
bonds
loans that pay interest
liquidity
how easily an asset can become cash
liability
requirement to pay money in the future
Interest Bearing asset
assets which pay interest
Financial asset
A paper claim that entities the buyer to future income from the seller
Speculation
An asset which has the risk of gaining but also losing value
The fisher effect
increase in inflation increases nominal interest rate by same amount
Expected inflation
rate at which prices are expected to rise
Unexpected inflation
consumers are unaware of an impending increase in market prices
Store of value
means of holding purchasing power over time
medium of exchange
an asset that individuals get for trading goods and services rather than consumption
circulation (currency)
flow of the money in an economy
Monetary base
Sum of currency in circulation and bank reserves
required reserves
minimum cash the bank can keep on its hand
excess reserves
cash that a bank has above required reserve
ample reserves
the way the bank makes sure there is a large amount of excess reserves
Bank liabilities
what the bank owes to others
Demand deposits
money deposited into an bank account which can be withdrawn on demand at any time
Money multiplier
ratio of money supply to monetary base
Federal reserve
central bank of the United States
money Market
where short term borrowing and lending of funds happens
Supply of Money
total amount of money in circulation
Transactions
Economic value is provided from one economics unit to the other
Traveler's check
a cheque used by people when traveling abroad to buy goods or exchange for forgiven currency
FOMC
federal open market committee, determines direction of money in the US.
Monetary policy
central banks use of changes in the quantity of money or interest rate to stabilize the economy.
Central bank
an institution that overseas and regulates the banking system and controls the monetary base.
price stability
when there are no major price fluctuations in the prices of consumer goods
Discount rate
interest rate fed charges on loans to banks
Reserve ratio
fraction of bank deposits the bank holds as reserves
Open market operations
a purchase or sale of the government debt by the federal reserve
securities
a financial instrument that has monetary value and can be traded
federal fund rate
the interest rate banks change other banks for loans
expansionary monetary policy
monetary policy which increases aggregate demand
contradictory monetary policy
monetary policy which reduces aggregate demand
loanable funds market
A hypothetical market that brings those who want to lend money and those who want to borrow money
Mortgages
Agreement that lender can take property if you are unable to repay specified amount and interest back
Closed economy
doesn't trade internationally
Open economy
trades with other countries
Note
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