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Money & Banking

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anything that serves as a medium of exchange, a unit of account, and a store of value
medium of exchange
anything that is used to determine value during the exchange of goods and services
the direct exchange of one set of goods or services for another
unit of account
a means for comparing the values of goods and services
store of value
Something that keeps its value if it is stored rather than used
paper money or coins
commodity money
objects that have value in themselves and that are also used as money
representative money
objects that have value because the holder can exchange them for something else of value
fiat money
money that has value because the government has ordered that it is an acceptable means to pay debts
an institution for receiving, keeping, and lending money
national bank
a bank chartered, or licensed, by the national government
bank run
widespread panic in which great numbers of people try to redeem their paper money
paper currency issued during the Civil War
gold standard
a monetary system in which the money supply is linked directly to the country's holdings of gold; citizens are usually entitled to exchange banknotes for gold. An international monetary system in which the valu…
Federal Reserve System
The independent government agency that regulates the nation's banking and financial industry is called the
central bank
bank that can lend to other banks in times of need
member bank
bank that belongs to the Federal Reserve System
Federal Reserve note
the national currency we use today in the United States
Great Depression
the severe economic decline that began in 1929 and lasted for more than a decade
Federal Deposit Insurance Corporation (FDIC)
the government agency that insures customer deposits if a bank fails
money supply
all the money available in the United States economy
the ability to be used as, or directly converted to, cash
demand deposit
the money in checking accounts
money market mutual fund
a fund that pools money from small savers to purchase short-term government and corporate securities
fractional reserve banking
a banking system that keeps only a fraction of funds on hand and lends out the remainder
occurs when an institution is unable to make interest payments or pay off the amount owed on a debt instruments at maturity
a specific type of loan that is used to buy real estate
credit card
A card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services
the price paid for the use of borrowed money
the amount of money borrowed in a loan of the amount of your money in savings account that is earning interest
debit card
a card used to withdraw money
person or institution to whom money is owed
Financial Markets
Markets in which funds are transferred from people with a surplus (savers) to people who have a shortage (borrowers)
Security (financial instrument)
A claim on the issuer's future income or assets
Any financial claim or piece of property that is subject to ownership
long term debt instrument
Interest Rate
Cost of borrowing funds
Common Stock (stock)
Represents a share of ownership in a corporation. It is a security that is a claim on the earnings and assets of the corporation
Financial Intermediaries
Business that specialize in borrowing funds from people who have saved and lending to people who want to borrow
Financial crises
Major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and nonfinancial firms
Financial institutions that accept deposits and make loans
Aggregate output
Total production of goods and services
Unemployment rate
The percentage of the available labor force unemployed
Business cycles
The upward and downward movement of aggregate output produced in the economy
Periods of declining aggregate output
Monetary theory
The theory that relates changes in the quantity of money to changes in aggregate economic activity and the price level
Aggregate price level (price level)
The average price of goods and services in an economy
A continual increase in the price level
Inflation rate
The rate of change of the price level, usually measured as a percentage change per year
Monetary policy
The management of money and interest rates
Federal Reserve System (the Fed)
The central banking authority responsible for monetary policy in the United States
Fiscal policy
Involves decisions about government spending and taxation
Budget deficit
The excess of government expenditures over tax revenues for a particular time period
Budget surplus
Arises when tax revenues exceed government expenditures
Gross Domestic Product (GDP)
The value of all final goods and services produced in the economy during the course of a year
Foreign Exchange Market
Market in which currencies are bought and sold and their prices are determined.
Foreign exchange rate
The price of one country's currency in terms of another's