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Level 51

Deposit & Payment Function

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Aggregate measures
tools used to estimate the size of the money supply
Annual percentage rate
nominal rate on which interest is calculated per year
Annual percentage yield
effective rate of interest when compounding is factored in
Cerfiticate of Deposit (CD)
savings instrument with fixed interest rate and fixed maturity date
Checking Account
an account which allows the holder to write checks against deposited funds
commodity money
objects that have value in themselves and that are also used as money
compound interest
(1+r)^t - 1
Demand deposit
deposit payable on demand whenever the depositor chooses
Discount rate
interest rate that the Fed charges for loans to member banks
Excess reserves
those reserves held by a bank beyond its reserve requirement
federal funds rate
the interest rate banks charge other banks on overnight loans
fiat money
money that has value because the government has ordered that it is an acceptable means to pay debts
Fractional-reserve system
practice of reserving only part of a deposited quantity
the price paid for the use of borrowed money
the ability to be used as, or directly converted to, cash
money market deposit account (MMDA)
Deposits with limitied checking account privileges that typically pay an interest rate comparable to Treasury bills or other money market instruments.
money supply
all the money available in the United States economy
Multiplier effect
phenomenon that creates new deposits from lending
Primary reserves
cash on hand, deposits due from banks, and the percentage required by the Federal Reserve System
Prime rate
interest rate banks charge their best and most reliable customers
Secondary reserves
reserves other than primary reserves
Statement savings account
provides a monthly or quarterly computerized statement detailing all account activity
Time deposit
deposit held for or maturing at a specified time
Transaction account
account that allows transactions to occur at any time and in any number