Studied by 0 people
Looks like no one added any tags here yet for you.
Demand deposit (bank deposit)
A demand deposit is a bank account from which funds can be withdrawn at any time without prior notice. These accounts typically include checking accounts and offer easy access to funds.
Discount rate
The discount rate is the interest rate charged by central banks on loans to commercial banks, influencing overall monetary policy and liquidity in the economy.
Excess reserves
Excess reserves are the funds that a bank holds beyond the required reserve ratio, which can be used for lending or investment.
Federal funds rate
The federal funds rate is the interest rate at which depository institutions lend reserve balances to other depository institutions overnight, influencing overall monetary policy and economic activity.
Fractional reserve banking
is a banking system in which banks hold a fraction of deposits as reserves and use the rest for lending. This practice allows banks to create money through the lending process.
Loanable funds market
The loanable funds market is a theoretical framework that describes the interaction between borrowers and lenders in the economy, determining the interest rate and the quantity of funds available for borrowing.
M1
The M1 money supply includes the most liquid forms of money, such as cash and checking account deposits, which are readily available for spending.
M2
M2 is a measure of the money supply that includes all of M1, plus savings accounts, time deposits, and other near-money assets. It represents a broader classification of money than M1.
M3
M3 is a measure of the money supply that includes all of M2, along with large time deposits, institutional money market funds, and other larger liquid assets, providing an even broader view of the money supply.
Monetary policy
The process by which a central bank manages the money supply and interest rates to influence economic activity, inflation, and employment levels.
Money Market
A sector of the financial market where financial instruments with high liquidity and short maturities are traded, including treasury bills and commercial paper.
Open-market operation
The buying and selling of government securities by a central bank to regulate the money supply and interest rates.
Required reserves
The portion of deposits that banks are required to hold in reserve and not lend out, as mandated by the central bank.
Actual (bank) reserves
The total amount of funds that a bank holds in reserve, including both required reserves and excess reserves, available for lending or investment.
Bonds
Debt securities issued by corporations or governments to raise capital, typically paying interest over a specified period.
Capital inflow
The movement of money into a country for investment or economic activity, reflecting foreign investment in domestic assets.
Commodity money
A type of money that has intrinsic value, typically consisting of physical goods like gold or silver, used as a medium of exchange.
Commodity-backed money
A type of currency that is backed by a physical commodity, such as gold or silver, giving it intrinsic value and allowing it to be exchanged for a specific quantity of the commodity.
Discount window
A facility through which central banks provide loans to financial institutions, typically at a lower interest rate, to help them meet short-term liquidity needs.
Federal funds market
A market where banks lend reserve balances to other banks overnight, typically at the federal funds rate, to maintain required reserve levels.
Fiat Money
A type of currency that is not backed by a physical commodity but instead derives its value from government regulation or law, allowing it to be used as legal tender.
Financial asset
Any asset that is liquid and can be traded, such as stocks, bonds, or cash, representing a claim on future cash flows.
Fisher effect
The theory that real interest rates are equal to nominal interest rates minus the expected inflation rate, indicating how inflation affects interest rates.
Illiquid
Describes an asset that cannot be quickly converted into cash without a significant loss in value, making it difficult to sell or trade in the market.
Liability
A financial obligation or debt that an individual or organization owes to another party, which must be settled over time through the transfer of economic benefits.
Liquid/liquidity
Refers to assets that can be quickly converted into cash with minimal loss in value, indicating the ease of buying or selling in the market.
Medium of exchange
A function of money that facilitates transactions by providing a standard measure of value, allowing goods and services to be traded efficiently.
Money multiplier
The ratio of the amount of money that banks are able to create with each dollar of reserves, reflecting the potential increase in the money supply through the lending process.
Monetary base
The total amount of a country's currency in circulation plus the reserves held by the central bank. It serves as the foundation for the money supply and is crucial for monetary policy.
National savings
The sum of private and public savings in a country, which contributes to the overall investment capacity and economic growth.
Physical asset
A tangible item with intrinsic value, such as real estate, machinery, or commodities, that can be used to generate income or capital appreciation.
Rate of Return
The gain or loss made on an investment relative to the amount invested, usually expressed as a percentage. It evaluates the efficiency of an investment or compares the efficiency of several investments.
Reserve ratio
The fraction of deposits that a bank must hold in reserve and not lend out, which is set by the central bank. It influences the money supply and banking operations.
Savings-investment spending identity
The economic principle that states that savings in an economy must equal investment spending, highlighting the relationship between these two components. It emphasizes the balance between what is saved and what is invested in the economy.
Store of value
An asset that can maintain its value over time and be used to transfer purchasing power from the present to the future, such as money or real estate.
T-account
It is a visual representation used in accounting to track changes in assets, liabilities, and equity, typically structured with debits on the left and credits on the right.
Unit of account
a standard measure used to set prices and compare the value of goods, services, and financial assets, making economic transactions and record-keeping more efficient.
Velocity of Money
the rate at which currency circulates in an economy, measuring how frequently a unit of money is used to purchase goods and services within a given period.
