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Who is on the 100$ bill?
Benjamin Franklin
Who is on the 50 dollar bill?
Ulysses S. Grant
Who is on the 20 dollar bill?
Andrew Jackson
Who is on the 10 dollar bill?
Alexander Hamilton
Who is on the 5 dollar bill
Abraham Lincoln
Who is on the 2 dollar bill
Thomas Jefferson
Who is on the 50 cent coin?
John F. Kennedy
Who is on the dime
Franklin D. Roosevelt
Who is on the 1000 dollar bill
Cleveland
Who is on the 100000 bill
Wilson
E Pluribus Unum means
out of many, one
How much is a 50 cent coin now
3-8 dollars
The Barter System
a system of exchange in which goods or services are traded directly for other goods or services without the use of money.
Commodity money
something that performs the function of money and has intrinsic value
fiat money
something that serves as money but has no other value or uses
Liquidity
the ease with which an asset can be converted into a medium of exchange
Money
anything that is generally accepted as payment for goods and services
Personal finance
The way individuals and families budget, save, and spend
Bonds
loans, or IOUs, that represent debt that the government, business, or individual must repay to the lender
Stocks
Represents ownership of a corporation and the stockholder is often entitled to a portion of the profit
Present value
The current worth of some future amount of money
Transaction demand for money
people hold money for everyday transactions
asset demand for money
people hold money since it is less risky than other assets
Demand deposits
money deposited in a commercial bank in a checking account
required reserves
The percent that banks must hold by law
Excess reserves
The amount that the bank can loan out
Balance Sheet
a record of a bank's assets, liabilities, and net worth
Discount rate
The interest rate on the loans that the Fed makes to banks
open market operations
when the FED buys or sells government bonds (securities)
Currency
the paper bills and coins that are used to buy goods and services
medium of exchange
what people trade for goods and services
Barter
involves individuals trading a good they already have or providing a service in exchange for something they want
double coincidence of wants
in which each party in an exchange transaction has what the other party desires
commodity-backed money
money that can be exchanged for a commodity at a fixed rate
unit of account
the measure in which prices are quoted
store of value
a means for holding wealth
checkable deposits
deposits in bank accounts from which depositors may make withdrawals by writing checks
M1
the money supply measure composed of currency and checkable deposits
M2
includes everything in M1 as well as savings accounts and small time deposits, MMDAs, and some other items
Reserves
the portion of bank deposits that are set aside and not loaned out
fractional reserve banking
occurs when banks hold only a fraction of deposits on reserve
Bank run
occurs when many depositors attempt to withdraw their funds at the same time
required reserve ratio
the portion of deposits that banks are required to keep on reserve
excess reserves
Any reserves above the required level
Moral Hazard
occurs when a party that is protected from risk behaves differently from the way it would behave if it were fully exposed to the risk
Federal funds
deposits that private banks hold on reserve at the Federal Reserve
Federal funds rate
the interest rate at which banks make overnight loans to one another
Discount loans
loans from the Federal Reserve to private banks
open market operations
involve the purchase or sale of bonds by a central bank
quantitative easing
the targeted use of open market operations in which the central bank buys securities specifically targeted in certain markets
Financial system
the set of institutions that connect savers with borrowers
Financial intermediary
an institution that transforms the funds it gathers from many individuals into financial assets (for the saver) and liabilities (for the borrower); the financial intermediary that people have the msot experience with is a bank, which converts the savings anf other deposits of many depositors into loans for borrowers
Asset
Some item of values thats expected to provide the holder some future benefit; factorues are an asset beacuse they can be used to produce goods that provide incone to a firm in the future, and a bond is an asset to a bondholder because itll give income in the future
Liabilities
Requirements to pay money in the future, a loan is a liability for the person who takes out a lon, but an asset to the person who loaned
real asset
(sometimes called a physical asset) a claim on a tangible object that gives the owner the right to use it as they wish. A house is a real asset that its owner can sell or rent out, and a factory is a real asset that a business can use to earn profits.
financial asset
a contractual claim to something of value; modern economies have four main types of financial assets: bank deposits, stocks, bonds, and loans.
financial risk
when there is any uncertainty about the future value of an asset; for example, if you don't know how many lime smoothies you can buy with the money in your savings account next week, the value of your savings account has risk, because inflation can reduce its value.
bank deposits
(also called demand deposits) money kept in a bank, like checking accounts; we call these "demand deposits" because banks are usually required to provide access to the money in those accounts immediately on request (in other words, on demand).
return
the profit made on an asset, usually expressed as a percentage; for example, a stock that is purchased for [$100] and sold for [$110] has a return of [10%].
stock
a slice of ownership in a company; if you own one share of a company that has a total of 100 shares, you own [1/100^\text{th}] of that company. Stocks derive their value from their ability to appreciate and the payment of dividends.
nominal interest rate
the interest rate that you earn (or pay) on a loan; this is the amount you see on a sign advertising interest rates.
real interest rate
the nominal interest rate adjusted for inflation; this is the effective interest rate that you earn (or pay).
Fisher effect
the idea that an increase in expected inflation drives up the nominal interest rate, which leaves the expected real interest rate unchanged
currency in circulation
money outside of banks, such as money in your wallet or your couch cushions; the money in your pocket is currency in circulation, but your money in your bank account is outside of circulation.
currency in vaults
(also called reserves) money that banks keep within the bank, outside of circulation
money supply
the total amount of money in an economy that can carry out the transactions motive; in most countries, the money supply is either the monetary aggregate [M1] or [M2].
monetary aggregates
an overall measure of the money supply that includes different forms of money which are categorized based on liquidity; the most commonly used monetary aggregates are [M1] and [M2].
monetary base
(also called high powered money and in some countries [M0]) the sum of currency in circulation and bank reserves held in vaults; only part of the monetary base (currency in circulation) is counted in the money supply.
money market
a graphical model showing the interaction of the demand for money and the money supply
money supply
a curve that shows the relationship between the amount of money supplied and the interest rate; because the central bank controls the stock of money, it does not vary based on the interest rate, and the money supply curve is vertical.
money demand
a curve showing the relationship between the quantity of money demanded and the interest rate; the money demand curve is downward sloping
liquidity preference
the amount of wealth that people want to keep in the form of cash in order to use it as a medium of exchange
transactions motive
The desire to hold money in order to buy things
monetary policy
the use of the money supply to influence macroeconomic aggregates, such as output, inflation, and unemployment
dual mandate
the two objectives of most central banks, to 1) control inflation and 2) maintain full employment
contractionary monetary policy
monetary policy designed to decrease aggregate demand, decrease output, and increase unemployment
expansionary monetary policy
monetary policy designed to increase aggregate demand, increase output, and decrease unemployment;
open market operations
the buying and selling of securities, such as bonds, by a central bank to change the money supply
Federal Reserve
(nicknamed the "Fed") the central bank of the United States of America; the Federal Reserve is responsible for maintaining the health of the financial system and conducting monetary policy.
interest on reserves (IOR)
interest on the deposits that commercial banks hold within the central bank
the market for loanable funds
a hypothetical market that shows how loans from savers are allocated to borrowers who have investment projects
savings-investment spending identity
an equation that demonstrates that investment spending and savings are always equal to each other; if there is [$100{,}000] in investment in an economy, that [$100{,}000] has to come out of savings.
budget surplus
when taxes collected are more than the amount of government spending, the difference between taxes and government spending is a budget surplus
budget deficit
when taxes collected are less than the amount of government spending, the difference between taxes and government spending is a budget deficit
budget balance
when the amount of taxes collected is exactly equal to the amount of government spending
public saving
the difference between taxes collected and government spending; when there is a budget surplus public saving is positive, but when there is a budget deficit public saving is negative.
disposable income
income that is left for consumption after taxes are paid; if your income is [$100] and you pay [$5] in taxes, your disposable income is [$95].
private saving
what is left of disposable income after consumption is taken out; if your disposable income is [$95] and you spend [$70], you have [$25] left in savings.
national savings
the total amount of private saving and public saving
closed economy
an economy which does not allow international trade or the movement of financial assets into or out of a country
open economy
an economy which does allow international trade or the movement of financial assets into or out of a country
foreign funds
financial assets, such as money, that come into a country from another country; if a resident of Florin buys a bond from the government of Guilder, that purchase represents foreign funds coming into Guilder.
domestic outflow of funds
financial assets that leave a country; If a resident of Florin buys a bond from the government of Guilder, that purchase represents domestic funds flowing out of Florin.
capital inflows
financial capital coming into a country; capital inflows are equal to the inflow of foreign funds minus the outflow of domestic funds.
rate of return
percentage gain or loss on an investment or the increase or decrease in value over time; for example, if a project costs [$100] to do but will generate [$108] in sales, its rate of return is 8%.
demand for loanable funds
a hypothetical curve that shows the willingness to borrow money to fund investment projects; as the interest rate decreases, the quantity of loans demanded will increase.
supply of loanable funds
a hypothetical curve that shows the willingness to save money and put it into a financial intermediary.
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