CLEP Macroeconomics Unit 3 Key Terms & Concepts

exchanging 1 good for another of similar value

a means of exchange

money that isn't backed by up anything (USA since 1972)

system of money in a particular country

flows through the eonomy very easily

cash, coins, checks, debit cards (can be easily exchanged)

savings account, certificates of deposits (CDs), savings bond, investments (not as easily exchanged)

foreign money, timed deposits (retirement fund) NOT LIQUID AT ALL!

how often a dollar exchanges hands in 1 year

quantity of money x money velocity = price x quantity of goods

price level = (money supply x velocity) / (quantity of goods)

the quantity of money demanded by households and businesses to transact their buying and selling of goods and services

bank system that provides people immediate access to their deposits but only allows banks to hold a fraction of these deposits in reserve

bank's statement of liabilities (what it owes) and assets (what it owns)

amount banks are required to keep in cash reserves

firms that accept deposits from savers and use those deposits to make loans to borrowers

increase in the money supply that is potentially generated by a change in demand deposits

quantity of reserves held by a bank in excess of the legally required amount

a note issued by a bank to redeem the note for a specific amount of gold/silver

central bank of the United States

federal reserve system

the Fed's principal decision-making body

interest rate the Fed charges banks that borrow reserves from it

policy directives used by the Fed to moderate swings in the business cycle

market in which banks lend and borrow reserves from each other for very short periods of time (usually overnight)

buying and selling of government bonds by the FOMC

interest rate on loans made by banks in the federal funds market

the amount that an investor must deposit in a margin account before buying on margin or selling short