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anything that is generally accepted as a means of payment
money
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three principal purposes of money
- medium of exchange
- provide a measure of value
- provide a store of value
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the direct exchange of one good for another good without a standard form of money passing from hand to hand
barter
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six characteristics of money
- portability
- durability
- homogeneity
- divisibility
- constancy
- intrinsic valuableness
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coined, metallic money
specie
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coins with a quality and value that has been lowered
debased
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when people save more stable and valuable forms of money, such as coins that are many years old, and will spend forms of money that seem less valuable
Gresham's Law
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the asserted value
face value
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when the level of prices in the market rises because too much money is in circulation
inflation
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if prices decrease because money seems more valuable and stable
deflation
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any form of money that has been declared a valid means of payment
legal tender
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gold, silver, or platinum, usually found in the form of bars, ingots, or plates)
bullion
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a system which allows banks to hold less than 100 percent of deposits in reserve
fractional reserve banking
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legal tender that is backed by nothing but a government's promise
fiat money
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the source of part of the American money supply
United States Department of the Treasury
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the majority of America's money supply is under the control of this central banking network
Federal Reserve System
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group of people whos duty is to operate America's banking system
Board of Governors
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makes decisions regarding the buying and selling of government securities
Federal Open Market Committee (FOMC)
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One for each of the nation's twelve Federal Reserve districts
Federal Reserve Banks
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Three main tools that the Federal Reserve uses to increase or decrease the amount of money in circulation
- open market operations
- reserve ratios
- discount rates
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a period, usually six months or longer, during which the economy recedes, or declines
recession
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the theory that the variation in the money supply is the main source of economic fluctuations
monetarism
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make loans directly to consumers
finance companies
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receive a premium paid by the insured to protect the family of the insured in the event of loss or death
insurance companies
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receive funds from a company's employees, and the employer may contribute to the fund on behalf of his employees
Pension funds
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occurs when someone buys or sells stocks on the stock market based on information that he has about a certain company that has not yet been made public
Insider trading
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property belonging to the borrower that the lender will hold until the loan is repaid, as a way of ensuring that the borrower has an incentive to repay the loan
collateral
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loan that is backed with collateral
secured loans
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involve greater risk for the lender since they are not backed with collateral
unsecured loans
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a court order demanding that a borrower's employer take a specified amount of an employee's wages each payday and pays the creditor directly
wage garnishment
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large initial cash payment
down payment
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partial ownership in the item
equity
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