CHAPTER 17 OF MACROECONOMICS
CHAPTER 17 OF MACROECONOMICS 2105 025
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This 3 page Class Notes was uploaded by Christina Smith on Sunday March 20, 2016. The Class Notes belongs to 2105 025 at Georgia State University taught by Mr. Apperson in Winter 2016. Since its upload, it has received 11 views. For similar materials see Macroeconomics in Economcs at Georgia State University.
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Date Created: 03/20/16
CHAPTER 17 OF MACROECONOMICS Currency The paper bills and coins that are used to buy goods and services. Medium of Exchange What people trade for goods and services. Barter Involves a trade of a good or service without a commonly accepted medium of exchange. Double Coincidence of Wants Occurs when each party in an exchange transaction happens to have what the other party desires. Commodity Money Involve the use of an actual place of money. Commodity Backed Money Money that can be exchanged for a commodity at a fixed rate. Fiat Money Has no value except as a medium of exchange. A Unit of Account The measure in which prices are quoted. Store of Value A means for holding well. Checkable Deposit Deposit in bank accounts from which depositories may make withdrawals by writing checks. M1 The money supply measure that is essentially composed of currency in checkable deposits. M2 The money supply measure that includes everything in M1 plus savings deposits, money market mutual funds, and small denomination time deposits. Balance sheet An accounting statement that summarizes a firms financial information. Assets The items that a firm owns. Liabilities The financial obligations a firm owes to others. Owners Equity The difference between a firms assets and its liabilities. Reserves The portion of bank deposits that are set aside and not lent out. Fractional Reserve Banking Occurs when banks hold only a fraction of deposit on reserve. Bank Run Occurs my many depositors attend to withdraw their funds at the same time. Required Reserve Ratio The portion of deposits that banks are required to keep on reserve. Excess Reserves Any reserves held in excess of those required. Moral Hazard When a party that is protected from risk behaves differently from the way it would behave if it were fully exposed to the risk. Simple Money Multiplier The rate at which banks multiply money when all currency is deposited into banks and they hold no excess reserves. Federal Funds Deposits that private banks hold on reserve at the federal reserve. Federal Funds The interest rate on loans between private banks. Discount Loans Loans from the Federal Reserve to private banks. Discount Rate The interest rate on discount loans made by the Federal Reserve to private banks. Open market operations Involve the purchase or sale of bonds by the central bank. Quantitative easing The targeted use of open market operations in which the central bank by securities specifically targeted in certain markets. MONEY SUPPLY= CURRENCY + DEPOSITS REQUIRED RESERVES = REQUIRED RESERVE RATIO X DEPOSITS EXCESS RESERVES = TOTAL RESERVES – REQUIRED RESERVES SIMPLE MONEY MULTIPLIER = 1 / REQUIRED RESERVE RATIO
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