chapter 10: Lecture Notes on Principles of Macroeconomics: Money, the Federal Reserve, and the Interest Rate

These flashcards cover key concepts and definitions from the lecture on money, the Federal Reserve, and interest rates in macroeconomics.

What are the functions of money?

Money serves as a means of payment, a store of value, and a unit of account.

What is required for a barter system to function?

A barter system requires a double coincidence of wants.

What is the definition of commodity money?

Commodity money is an item used as money that also has intrinsic value in some other use.

What is fiat money?

Fiat money is items designated as money that are intrinsically worthless, such as the U.S. dollar.

What is the demand for money positively related to?

The demand for money is positively related to the size of transactions.

What does M1 measure?

M1 measures transactions money, which includes currency held outside banks and demand deposits.

What is the money multiplier?

The money multiplier is the multiple by which deposits can increase for every dollar increase in reserves.

What is the role of the Federal Reserve?

The Federal Reserve controls the money supply and regulates banks.

What happens to the prices of existing securities when interest rates rise?

The prices of existing securities fall when interest rates rise.

What are excess reserves?

Excess reserves are the difference between a bank's actual reserves and its required reserves.