Terms
The direct exchange of one good or service for another good or service rather than money
Barter
What does FDIC stand for?
Federal Deposit Insurance Cooperation
3 Components of bank bookkeeping
1. Required reserves
2. Excess reserves
3. Loans
How dose monetary policy affect interest rates?
It influences the supply of money and setting benchmark rates which in turn impacts borrowing costs and economic activities
The maximum charge in the money supply due to initial change in the excess reserves and banks hold
Monet Multiplier
What does FOMC stand for?
Federal open market committee
3 Functions of money
1. Medium of exchange
2. Unit of account
3. Store value
What happens to equalibrium interest rates if excess money is demanded?
Price of bonds fall and the intrest rates rise
An accounting identity that states the money supply times the velocity of money equals total spending
Equation of Exchange
Money accepted by law and not because of its redeemably or intrinsic value
Fiat Money
3 Reasons why people hold money
1. Transactions demand
2. Precautionary demand
3. Speculative demand
What happens to interest rates when excess money is supplied?
The demand for bonds increases and the interest rates lower
The function of money to provide a common measurement of relative value of goods and services
Unit of account
What is the group of 7 members appointed by the president and senate who serve for a 14 year term, that help to supervise the money supply and banking systems?
Board of Governors of the Federal Reserve System
1. Accepting a new deposit
2. Making a loan
3. Clearing the loan check
What is velocity of money?
The average of times per year that a dollar of money supply is spent on final goods and services.