Money
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| Barter | Direct exchange of goods and service for other goods and services.
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| 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).
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| 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.
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| 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.
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| What is near money | Satisfies some but not all of the four functions of money. Examples of near money include cheques and credit cards.
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| 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
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| 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.
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| Fractionally backed | A currency where more notes are issued than are backed by currency reserves.
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| Gold Standard | A currency where notes are fully backed and redeemable in an equivalent amount of gold is often called The Gold Standard.
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| Legal tender | Money that must be accepted for payment of a purchase or in settlement of a date.
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| Official External Reserves | The country's official holdings of gold, foreign currencies and other reserves held as security against the issue of the euro.
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| Plastic Money | the term used to describe credit cards, ATM cards and debit cards as alternative methods of payment
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| Reserve Ratio (Primary Liquidity Ratio or Cash ratio) | The percentage of the bank's total deposit liabilities that most be held in cash form.
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| Token Money | Coins whose intrinsic (metallic) value is less than its face value.
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| 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.
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| Money | is defined as anything that is generally accepted by people in exchange for goods and services or repayment of a debt
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| Forms of Money | Cash (notes and coins), cheques, electronic payments/plastic money, ATM cards, Debit cards, credit cards
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| ECB | ECB stands for European Central Bank it is responsible for the monetary policy in the Eurozone.
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| 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
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| Primary Liquidity Ratio | is the amount of money in respect of its short term deposits that banks are required to keep in cash
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| 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.
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| M1 Money Supply | currency in circulation and current account balances
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| M2 Money supply | M1 plus Deposit account balances
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| M3 Money Supply | M2 plus all other loan instrument up to 2 years (repos, money market securities, debt securities up to 2 year maturity)
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| Bank's twin objectives | profitability and liquidity
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