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Money
| Term | Definition |
|---|---|
| Barter | Direct exchange of goods and service for other goods and services. |
| Eurozone | An economic and monetary union of 17 of the 27 EU member states that have adopted the Euro as their common currency and sole legal tender (officially called the euro area). |
| Characteristics of Money | Money is divisible, portable, homogenous, transferable, durable, a unit of account, scarce. Money should be generally accepted as payment for goods and services. |
| Functions of Money | Money is a medium of exchange, acts as a store of wealth, acts as a standard of deferred payments and money is a common denominator. |
| What is near money | Satisfies some but not all of the four functions of money. Examples of near money include cheques and credit cards. |
| Monetary Policy | The policy of the ECB (and the actions taken by it)that affect the rate of interest, the money supply, the availability of credit and the value of the currency |
| Credit Crunch | A reduction in the availability of loans to businesses and individuals and/or the imposition of more severe conditions on the granting of loans. |
| Fractionally backed | A currency where more notes are issued than are backed by currency reserves. |
| Gold Standard | A currency where notes are fully backed and redeemable in an equivalent amount of gold is often called The Gold Standard. |
| Legal tender | Money that must be accepted for payment of a purchase or in settlement of a date. |
| Official External Reserves | The country's official holdings of gold, foreign currencies and other reserves held as security against the issue of the euro. |
| Plastic Money | the term used to describe credit cards, ATM cards and debit cards as alternative methods of payment |
| Reserve Ratio (Primary Liquidity Ratio or Cash ratio) | The percentage of the bank's total deposit liabilities that most be held in cash form. |
| Token Money | Coins whose intrinsic (metallic) value is less than its face value. |
| Fiduciary issue | is that proportion of a country's currency that is not backed by gold but by foreign currencies and securities. This is a concept based on trust. |
| Money | is defined as anything that is generally accepted by people in exchange for goods and services or repayment of a debt |
| Forms of Money | Cash (notes and coins), cheques, electronic payments/plastic money, ATM cards, Debit cards, credit cards |
| ECB | ECB stands for European Central Bank it is responsible for the monetary policy in the Eurozone. |
| Functions of the ECB | 1) maintains price stability (inflation at or below 2%) by adjusting the base ECB interest rate. 2) Formulate & implements EU monetary policy 3)manages the official reserve of the euro area countries. 4)Financial stability&supervision 5)issues euro |
| Primary Liquidity Ratio | is the amount of money in respect of its short term deposits that banks are required to keep in cash |
| Capital adequacy ratio | is the percentage of a bank's capital to its risk weighted assets. Tier I capital is comprised of profits (retained earnings) and certain types of shares. This is the amount of back up a capital has apart from cash as security. |
| M1 Money Supply | currency in circulation and current account balances |
| M2 Money supply | M1 plus Deposit account balances |
| M3 Money Supply | M2 plus all other loan instrument up to 2 years (repos, money market securities, debt securities up to 2 year maturity) |
| Bank's twin objectives | profitability and liquidity |
Created by:
pdsteconomics
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