Money
This kind of money is acceptable as payment for transactions because the government which issues it says it has value.
What is fiat money?
If the legal reserve requirement is 25 percent, the value of the money multiplier is:
What is 4?
When government spending exceeds government revenue for a given year
What is a budget deficit?
When many depositors try to withdraw their funds because they fear the bank may fail
What is a bank run?
When an asset can easily be converted into cash, it's called this
What is liquid?
Currency in circulation, demand deposits, and travelers' checks.
What are the components of the M1 money supply?
If a bank customer deposits $100 cash, and the required reserve ratio is 20%, then the bank's excess reserves initially increase by _______ because of this transaction.
What is $80?
Savings and investment spending are always equal for the economy as a whole
What is the savings-investment spending identity?
The amount per account per owner that the FDIC guarantes
What is $250,000?
National savings is comprised of these two things
What are private savings and public savings (or the budget balance)?
The statement, "It will cost you $30 to buy this sweater." expresses this role of money.
What is a medium of exchange?
The system by which banks keep a percentage of demand deposits on hand but then loan out the rest.
What is "fractional reserve banking"?
A paper claim that entitles the buyer to future income from the seller
What is a financial asset?
What FDIC stands for
What is Federal Deposit Insurance Corporation?
Loans, stocks, bonds, and bank deposits
What are financial assets?
When a menu lists the prices for various entrees at a restaurant, we see money acting as a ...
What is a unit of account?
The change in the money supply from a $300 cash deposit, if the required reserve ratio is 10%.
What is an increase of $2700?
The total inflow of foreign funds to a country minus the total outflow of domestic funds to other countries
What is capital inflow?
The requirement that bank owners hold a lot more assets than the value of bank deposits.
What are capital requirements?
Placing savings in a wide variety of financial assets with unrelated or independent risks, in order to reduce risk
What is diversification?
Characteristics of an object that make it usable as money
What are portable, uniform, divisible, durable and limited? (PUDDL)
The change in the money supply from a $400 cash withdrawal from a bank, if the required reserve ratio is 20%.
What is a decrease of $1600?
The three tasks of a financial system
What are reducing transaction costs, reducing risk, and providing liquidity?
The channel through which the Federal Reserve lends money to banks
What is the discount window?
Mutual funds, pension funds, life insurance companies, and banks
What are financial intermediaries?