Macro Chpater 7: Banks, Money, and the federal Reserve System

Define Asset

Anything of Value owned by a person of firm 

Define Money

Asset people are generally willing to accept in exchnage for goods and services

Bartering

How we use to get our wants/needs by trading goods/services for others of comparable value

Double coincidence of wants

A requirement in a barter system is that two individuals must each have what the other wants to make a direct exchange. Eliminated by the use of money.

Four primary function of money

Medium of exchnage, unit od account, store of value, standard of deffered payment

Define medium of exchange

Money is acceptbvake to a wide variety of parties as a form of payment for goods and services

Define unit of account

Money allows a way of measuring value in a standard manner

Define store of value

Money allows people to defer consumption till a later dates by storing value, Other assets can do this too, but money does it particularly well because it is liquid, easily exchanged for goods 

Define standard of deferred payment

Money facilitates exchanges across time when we antiquate that its value (purchasing power)in the future will be predictable 

M1

The sum of currency in circulation and checking account and saving account deposits in banks 

M2

M1, plus small-denomination time deposits, and noninstituitional money market fund share s

Are debit cards and credits aprat of M1 or M2

Neither

Define Reserves

Deposits a bank keeps as cash in its vault or on deposits with the federal resverve

No

Do banks keeo enough deposits in reserves to cover all deposits

Define required reserves

Banks used to have to keep 10% of all checking deposits in reserves called ____. After 202 this was eliminated.