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Medium of Exchange
anything that is generally accepted as a standard of value and a measure of wealth in a particular country or region
M1
narrowest measure of the money supply; all coins and paper bills in circulation, traveler's checks, checking account balances, and balances in credit unions
Time Deposits
savings plans that require savers to leave their funds on deposit for certain periods of time
Total Demand for Money
Transactions Demand + Assets Demand
12 Federal Reserve Banks
under mixed public/private control; These are the banker s banks, no individuals allowed
M3
a measure of the money supply
, All of M1 + M2 + large denomination time deposits and large-denomination repurchase agreements.
Unit of Account
a means for comparing the values of goods and services
Transaction Demand
the amount of money held in order to make transactions
M2
All of M1 + less immediate (liquid) forms of money to include savings, money market mutual funds, and small denomination time deposits.
Store of Value
something that keeps its value if it is stored rather than spent
Asset Demand
the amount of money people want to hold as a store of value; this amount varies inversely with the interest rate
Excess Reserves
reserves that banks hold over and above the legal requirement
Monetary Multiplier
1/RR
Actual Reserves
Is the amount of money in reserve a bank currently has.
Required Reserves
reserves that a bank is legally required to hold, based on its checking account deposits
Open-Market Operations
the buying and selling of government securities to alter the supply of money
Easy Money Policy
monetary policy that increases the money supply
Federal Funds Rate
interest rate banks charge each other for loans
Reserve Ratio
the fraction of deposits that banks hold as reserves
Tight Money Policy
monetary policy that reduces the money supply
Velocity of Money
the rate at which money changes hands
Discount Rate
interest on an annual basis deducted in advance on a loan
Cyclical Asymmetry
monetary policy is more successful in slowing expansions and controlling inflation than in extracting the economy from severe recession
Open-Market Operations
the buying and selling of government securities to alter the supply of money
