What Is Money?
This is the term for money’s ability to be used for buying goods and services
medium of exchange
The main activity banks do with deposits to earn profit is called this
lending
This is the most liquid component of the money supply
This is the official currency of the Republic of Armenia
Armenian Dram
This institution issues the national currency of a country
central bank
Money must hold its value over time to perform this function
store of value
This is the fee banks charge borrowers for using their money.
Interest
Savings deposits belong here but not in M1
M2
This symbol represents the Armenian Dram
֏
This central bank tool requires commercial banks to hold a certain percentage of deposits as reserves, limiting how much they can loan out.
reserve requirement
Gold coins and cigarettes in prisons are examples of this type of money
The percentage of deposits banks must hold as reserves is called this
reserves
This action by the central bank decreases the money supply by removing liquidity from the banking system.
selling government securities (open market sale)
Before modern Armenia reintroduced the Dram in 1993, this historical Armenian kingdom had already used a coin called the “dram” (or “tram”) as its official currency.
Armenian Kingdom of Cilicia
When the central bank buys government securities, the money supply does this
increases
This type of money has no intrinsic value but is accepted because the government says so.
fiat money
This banking concept describes what happens when too many depositors try to withdraw cash at the same time
bank run
This digital form of central bank money is being explored worldwide and may become part of the money supply
CBDC
This artist appears on the 20,000 dram banknote of the 2018 series.
Ivan Aivazovsky
The Central Bank of Armenia was established in this year.
1993
This process occurs when rising prices decrease the purchasing power of money over time.
Inflation
This type of account is used for everyday spending and allows unlimited withdrawals.
Current account
This process explains why a single cash deposit can lead to a larger increase in the money supply through repeated rounds of lending and redepositing.
money multiplier
This year marks the introduction of the modern Armenian Dram, replacing the Soviet ruble after Armenia gained independence.
1993
This is the main objective of most modern central banks, including the CBA
price stability