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Barter Direct exchange of goods and service for other goods and services.
Eurozone An economic and monetary union of 17 of the 27 EU member states that have adopted the Euro as their common currency and sole legal tender (officially called the euro area).
Characteristics of Money Money is divisible, portable, homogenous, transferable, durable, a unit of account, scarce. Money should be generally accepted as payment for goods and services.
Functions of Money Money is a medium of exchange, acts as a store of wealth, acts as a standard of deferred payments and money is a common denominator.
What is near money Satisfies some but not all of the four functions of money. Examples of near money include cheques and credit cards.
Monetary Policy The policy of the ECB (and the actions taken by it)that affect the rate of interest, the money supply, the availability of credit and the value of the currency
Credit Crunch A reduction in the availability of loans to businesses and individuals and/or the imposition of more severe conditions on the granting of loans.
Fractionally backed A currency where more notes are issued than are backed by currency reserves.
Gold Standard A currency where notes are fully backed and redeemable in an equivalent amount of gold is often called The Gold Standard.
Legal tender Money that must be accepted for payment of a purchase or in settlement of a date.
Official External Reserves The country's official holdings of gold, foreign currencies and other reserves held as security against the issue of the euro.
Plastic Money the term used to describe credit cards, ATM cards and debit cards as alternative methods of payment
Reserve Ratio (Primary Liquidity Ratio or Cash ratio) The percentage of the bank's total deposit liabilities that most be held in cash form.
Token Money Coins whose intrinsic (metallic) value is less than its face value.
Fiduciary issue is that proportion of a country's currency that is not backed by gold but by foreign currencies and securities. This is a concept based on trust.
Money is defined as anything that is generally accepted by people in exchange for goods and services or repayment of a debt
Forms of Money Cash (notes and coins), cheques, electronic payments/plastic money, ATM cards, Debit cards, credit cards
ECB ECB stands for European Central Bank it is responsible for the monetary policy in the Eurozone.
Functions of the ECB 1) maintains price stability (inflation at or below 2%) by adjusting the base ECB interest rate. 2) Formulate & implements EU monetary policy 3)manages the official reserve of the euro area countries. 4)Financial stability&supervision 5)issues euro
Primary Liquidity Ratio is the amount of money in respect of its short term deposits that banks are required to keep in cash
Capital adequacy ratio is the percentage of a bank's capital to its risk weighted assets. Tier I capital is comprised of profits (retained earnings) and certain types of shares. This is the amount of back up a capital has apart from cash as security.
M1 Money Supply currency in circulation and current account balances
M2 Money supply M1 plus Deposit account balances
M3 Money Supply M2 plus all other loan instrument up to 2 years (repos, money market securities, debt securities up to 2 year maturity)
Bank's twin objectives profitability and liquidity
Created by: pdsteconomics



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