Vocab Terms
something that people “generally accept” in exchange for goods and services.
What is money?
One of the narrowest measurements of the money supply
What is M1?
Scraps of paper issued by a bank, government, or central bank that is not “backed up” by anything.
What is Fiat Money?
If you greatly prefer current consumption to future consumption
What is High time preference?
inflation occurs when
The money supply grows too quickly
a system of money in general use in a particular country.
What is Currency?
A broader measurement of the money supply that builds on M1
What is M2?
Various measurements of the money supply are called money supplies or
What is Monetary Aggregates
indifferent between consuming now or in the future
What is Low time preference?
If the money supply increases too quickly, you have
What is too much money chasing too few goods?
A country legally accepts another country’s currency as their legal tender
Savings deposits, including money market deposit accounts
What is M2?
The most liquid of assets; that is, it is the easiest and least expensive way to transform one asset into another asset.
What is money?
When I ask you to defer your consumption to the future (something you don’t want to do), I have to compensate you. The compensation I pay you is called
What is interest?
If the money supply does not grow fast enough, there will not be enough money for transactions to take place and the economy will slide into a
What is recession or depression
An asset that is going to function as money first must be generally accepted by all sides in a transaction.
What is medium of exchange?
Demand deposits and other checkable deposits, except those due to the Treasury and depository institutions (basically checking accounts)
M1 and M2
the liabilities, or promises to repay, of the central bank
What is the issuances of fiat money?
because of the time value of money, we have
What is interest rates?
A general increase in prices and fall in the purchasing value of money
What is inflation?
Standardized monetary unit used to measure and compare the economic value of goods
What is Store of Value?
Shares in retail MMMFs, net of retirement accounts
M2
Everything else being constant, people would prefer to consume today as opposed to in the future because life is uncertain.
What is the time value of money?