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Macro Chapter 17
| Term | Definition |
|---|---|
| currency | the paper bills and coins that are used to buy goods and services |
| medium of exchange | what people trade for goods and services |
| barter | the trade of a good or service without a commonly accepted medium of exchange |
| double coincidence of wants | condition occurring when each party in an exchange transaction happens to have what the other party desires |
| commodity money | the use of an actual good in place of money |
| commodity-backed money | money that can be exchanged for a commodity at a fixed rate |
| fiat money | money that has no value except as the medium of exchange; there is no inherent or intrinsic value |
| unit of account | the measure in which prices are |
| store of value | a means for holding wealth |
| checkable deposits | deposits in bank accounts from which depositors may make withdrawals by writing checks |
| M(1) | the money supply measure that is essentially composed of currency, checkable deposits, and traveler's checks |
| M(2) | the money supply measure that includes everything in M1 plus savings deposits, money market mutual funds, and small-denomination time deposits (CDs) |
| balance sheet | an accounting statement that summarizes a firm's key financial information |
| assets | the items that a firm owns |
| liabilities | the financial obligations a firm owes to others |
| owner's equity | the difference between a firm's assets and its liabilities |
| reserves | the portion of bank deposits that are set aside and not loaned out |
| fractional reserve banking | a system in which banks hold only a fraction of deposits on reserve |
| bank run | event occurring when many depositors attempt to withdraw their funds from a bank at the same time |
| required reserve ratio | the portion of deposits that banks are required to keep on reserve |
| excess reserves | any reserves held by a bank in excess of those required |
| moral hazard | the lack of incentive to guard against risk where one is protected from its consequences |
| simple money multiplier | the rate at which banks multiply money when all currency is deposited into banks and they hold no excess reserves |
| federal funds | deposits that private banks hold on reserve at the Federal Reserve |
| federal funds rate | the interest rate on loans between private banks |
| discount loans | loans from the Federal Reserve to private banks |
| discount rate | the interest rate on the discount loans made by the Federal Reserve to private banks |
| Open market operations | involve the purchase or sale of bonds by a central bank |
| quantitative easing | the targeted use of open market operations in which the central bank buys securities specifically targeting certain markets |
Created by:
v.virgil
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