Macroeconomics - Money, The Price Level, and Inflation

A series of flashcards covering key concepts and definitions from the chapter on money, the price level, and inflation in macroeconomics.

Unit of Account

An agreed measure for stating the prices of goods and services.

Store of Value

Money can be held for a time and later exchanged for goods and services.

Barter

A method of exchanging goods and services directly without the use of money, which requires a double coincidence of wants.

Liquidity

The property of being instantly convertible into a means of payment with little loss of value.

Depository Institutions

Financial institutions that accept deposits and make loans, including commercial banks.

Open Market Operations

The purchase or sale of government securities by the Fed to influence the quantity of money.

Required Reserve Ratio

The minimum percentage of deposits that a depository institution must hold as reserves.

Quantitative Easing

A monetary policy where the central bank purchases large amounts of securities to increase the monetary base.

Money Market

A virtual market in which households and businesses demand money and banks supply money, determining equilibrium interest rates.

Opportunity Cost of Hold Money

The nominal interest rate foregone by not holding an interest-earning asset.

Financial Innovation

Changes that lower the cost of switching between money and interest-earning assets, affecting demand for money.