Money and Banking Overview

Flashcards covering key terms and concepts related to money and banking.

Money

Any commodity that can be used as a medium of exchange for the purchase of goods and services.

Legal tender

Officially issued banknotes and coins that are recognized by law as valid for meeting a financial obligation.

Cash

Physical form of money consisting of banknotes and coins.

Bank deposits

Money reserves placed in commercial bank accounts, typically in electronic form.

Central bank reserves

Money held by the central bank and used by commercial banks to make payments between one another.

Medium of exchange

A function of money that allows it to facilitate trade by being widely accepted as payment.

Unit of account

A function of money that provides a standard measure of value for goods and services.

Store of value

A property of money that allows it to maintain its value over time, enabling future purchases.

Standard of deferred payment

A function of money that allows it to be used as a standard for future payments of debt.

Durability

A characteristic of money that ensures it is long-lasting and can be easily replaced if worn out.

Acceptability

A characteristic of money demonstrating that it is widely recognized and accepted in transactions.

Divisibility

The quality of money that allows it to be divided into smaller units to facilitate transactions of varying sizes.

Uniformity

A characteristic of money that ensures identical features (shape, size, design) across units.

Scarcity

The quality of money that demands it be limited in supply to maintain its value.

Portability

The ease with which money can be transported and used in transactions.

Bartering

The act of swapping items in exchange for other items in the absence of money.

Central bank

The monetary authority of a country that manages the money supply and oversees the banking system.

Commercial bank

A retail bank that provides financial services such as accepting deposits and issuing loans.

Credit creation

The process by which banks increase the money supply by lending out deposits to borrowers.