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30 Cards in this Set
- Front
- Back
credit |
available savings that are lent to borrowers to spend |
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demand deposit |
a checking account that requires the bank to pay the amount of the check immediately upon request |
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money (deposit expansion) multiplier |
the reciprocal of the reserve requirement |
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excess reserves |
the amount of money banks can lend out |
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FDIC |
insures bank deposits up to $250,000 |
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fractional reserve banking system |
when banks keep less than 100% of their deposits available for withdrawal |
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liquid asset |
can be easily exchanged for goods and services |
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M1 Money supply |
consists of cash in circulation and checking account deposits |
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M2 Money supply |
includes cash in circulation, checking, saving, certificates of deposit, and money market mutual funds |
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required reserves |
percentage of checking deposits that must be kept on hand or deposited at the Federal Reserve |
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discount rate |
the interest rate charged to banks on loans obtained from the Federal Reserve |
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equation of exchange |
relates the quantity of money to nominal GDP |
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federal funds rate |
the interest rate charged to banks on loans from other banks |
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FOMC |
the official policy making body of the Federal Reserve |
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foreign exchange market intervention |
the buying and selling of currencies by a central bank in order to influence the exchange rate |
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legal reserves |
cash in a bank's vault plus the amount deposited at the Federal Reserve |
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open market operations |
buying and selling of securities by the Federal Reserve in order to influence the money supply and the fed funds rate |
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precautionary demand for money |
used to cover unplanned transactions or emergencies |
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quantity theory of money |
assuming constant velocity of money, changes in the quantity of money changes nominal GDP |
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transaction demand for money |
created by the desire to buy goods and services |
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velocity of money |
average number of times each dollar is spent on final goods and services in a year |
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certificates of deposit |
savings accounts that are deposited for a specific period of time |
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thrift institutions |
credit unions, savings and loans, and mutual savings banks |
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financial intermediaries |
bring together savers and borrowers |
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Board of Governors |
the seven members who set and direct district banking policies and determine the course of monetary policy |
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Federal Reserve Notes |
paper money issued by the Federal Reserve Banks |
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fiat money |
anything that is money because of a government decree |
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medium of exchange |
the function of money that allows the exchange of goods and services without the use of barter |
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store of value |
function of money that allows an asset to set aside for future use |
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unit of account |
the function of money that allows the value of goods and services to be compared |