Exam II Econ

Commodity Money

Items that can be used as money but also have intrinsic value (Gold, silver, wheat, etc.)

Fiat/Token Money

(Items used as money that are intrinsically worthless (Paper like USD)

Legal Tender

money ythat is legally valid for the payment of debts

M1

Transaction Money (Can be used directly for transactions (no interest),= Currency held outside banks (cash) + demand deposits + traveler’s checks + other checkable deposits

M2

Broad money M1 + savings accounts + money market accounts + other near monies

FED

– Federal Reserve (Controls the money

supply)

Interest on Reserve Balances (IORB)

Rate at which FED pays banks to keep their money safe

Overnight Reverse Repo (ON RRP)

FED borrows money from banks overnight with treasury securities as collateral. The next day, banks get money back plus interest

Required Reserve Ratio (g)

% that banks must keep with the FED

Discount Rate (DR)

Rate at which banks borrow from the FED