Chapter 4 money terms: banking and financial systems

aggregates

the different measures that are complied from a collection of data sources by which the money supply is measured

barter

the exchange of one good and service for another good or service

coincidence of wants

occurs when two people want what each other has to offer

commodity

anything that is useful or has value

commodity money

something of perceived value used as payment for something else of perceived value

counterfeit

a copy of something represented as the real thing

denomination

the unit in which money is available

divisibility

the ability to be broken into smaller units

excess reserve

the funds available for a bank to loan out after its reserve is met

fiat money

money that has value because the government says it has value

fractional reserve system

a system that requires banks and other depository institutions to keep a fraction of their deposits in reserves

gold-exchange standard

allowed foreign governments but not individuals to redeem US dollars for gold

gold standard

a system that determines how much gold each paper note represents

inflation

when too much money in the economy results in rising prices

interest rate

a stated cost for the use of borrowed money that is a percentage paid on top of the initial amount

legal tender

money that must be accepted for payment of debts or to make purchase

medium of exchange

anything that is exchanged for goods and services , such as money

money

anything of value that is accepted in return for goods and services

money multiplier effect

the phenomenon that occurs when new deposits increase the money supply by more than the original deposits

money supply

the total amount of money available in an economy at a given time

prime rate

the interest rate that banks charge their best customers

representative money

a bill or coin that can be exchanged for an item of value

reserves

a percentage of the banks funds that is kept to ensure that money will be available for customers and is not available for loans ; also known as required reserves

store of value

something that can be saved or stored to use at a future date

unit of account

a common measure of what something is worth