Money

Whatever is generally acceptable as payment to the seller of a good or service. An asset that can easily be used to purchase goods and services

In a modern economy, money consists of _____________that can be disbursed by check

Cash held by the public

Bank accounts on which people can write checks

Total value of financial assets  in the economy that are considered money

Trading of one good or service for another.

Roles Of Money:

One that can be converted into goods or services quickly at low cost and with low risk.

Good that is used as a medium of exchange that has a value in it’s own right

A medium of exchange with no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods.

Something that has value because government says that it has value

a financial intermediary that uses liquid assets in the form of banks deposits to finance the illiquid investments of borrowers

Are the currency banks hold in their vaults plus their deposits at the Federal Reserve

Is the fraction of bank deposits that a bank holds as reserves

Summarizes a bank’s financial position

A phenomenon in which many of a bank’s depositors try to withdraw their funds due to fears of a bank failure.

Guarantees that a bank’s depositors will be paid even if the bank does not have the funds, up to a maximum per account.

Are requirements by the Federal Reserve that  bank owners hold substantially more assets than the value of bank deposits.

are rules set by the Federal Reserve that determine the minimum reserve ratio for a bank. (10%)

The Federal Reserve lends money to banks through an arrangement known as the ___________.

The ________ is the central bank of the United States, established in 1913.

Is the government agency that oversees the banking system and is responsible for the amount of money and credit in the economy.

Federal Reserve system consists of:

Consists of The Board of Governors and 5 of the 12 district bank presidents and makes key decisions about interest rates and the growth of the United States money supply.

Represents total assets minus total liabilities

Best known for regulating the money supply

Factors that affect demand for money:

To assist the economy in achieving a full-employment, noninflationary level of total output

refers to the action the FED takes to influence economic performance

Categorized Monetary Policy by 4 Characteristics:

The _______ is the amount that must be kept by banks...this is established by the FED

Policy Tools/Instruments:

Banks borrow from the FED and the interest charged is known as the ________.

In turn, these banks loan to customers (you and me) and the interest rate charged is known as the _________.