Module 10 econ study guide

medium of exchange

whatever is widely accepted as method of payment

store of value

something that serves as a way of preserving economic value that can be spent or consume in the future

• even a paper/dollar holds value even tho its a mere paper

standard of deferrred payment

anything used to purchase goods today or pay in the future

unit of account

common way of measuring value in an economy

• everything sold in the US is valued in $

commodity money

money is backed by certain commodities linked to/backed up by gold or another commodity

fiat money

no intrinsic value but declared as legal tender by the govt

assets

what a firm OWNS

liabilities

what a firm owes

is deposit a asset or liability

liability

loans, assets and bonds are

considered a asset

monetary policy applies to government or federal reserve?

federal reserve

contractionary monetary policy
does it raise or lower interest rate

RAISE interest rate

contractionary monetary policy
raises interest rates which leads to

less borrowing and spending

contractionary policy

What happens to aggregate demand

AD decrease

shift to left

what is used to solve inflation

contractionary policy

expansionary monetary policy

lowers the interest rate

• more borrow and spending

what is used to solve recession

expansionary policy

what happens to the aggregate demand during expansionary policy

Agg demand increase

shifts to the right