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Money and Banking LC
Keywords and concepts for Money and Banking
| Term | Definition |
|---|---|
| Money | Anything that is generally accepted by people in exchange for goods and services. |
| Barter | Direct exchange of goods and services for other goods and services. |
| Legal tender | Money that must be accepted if offered in payment for a purchase or in settlement of a debt. |
| Means of Exchange | Enables people to freely exchange the goods and services that they produce. |
| Measure of Value | Can relate value of one good to another using the amount of money paid . |
| Deferred payment | Allows goods and services to be bought and sold on credit. |
| Store of value | People can accumulate wealth as money holds value over time. |
| Characteristics of money | Recognisable; Portable; Divisible; Durable; Scarce |
| Gold Standard | A currency where notes are fully backed by an equivalent amount of gold. |
| Fiduciary issue | The proportion of a country's currency that is not backed by gold. |
| Forms of money | Cash; Cheques; Plastic money |
| Commercial banks | Institutions that provide deposit and lending services to personal consumers and businesses. |
| Functions of commercial banks | Savings facilities; Lending; Current accounts; 24 hour banking; Computerised transfer of money/ Automated bill payment; Foreign Exchange |
| Merchant bank | Deals with the banking needs of the business sector. |
| Industrial banks | Specialise in providing instalment credit to personal borrowers and companies. |
| An Post | Government-owned; Deposits state-guaranteed; Mostly a savings medium |
| Credit Union | Small locally-based organisation; Non-profit; Owned by the members |
| Liquidity | How readily an asset can be converted into cash. |
| Primary Liquidity Ratio/ Reserve Ratio | The percentage of a bank's total deposits that the Central Bank requires commercial banks to hold in cash form. |
| Limits on banks to create credit | Size of cash deposits; Demand for loans; Availability of creditworthy customers; ECB guidelines; Primary Liquidity Ratio |
| Inter-bank market | Banks can borrow or lend among themselves for fixed periods. |
| Roles of the Central Bank | Prints and issues legal tender; Bank to the government; Banker's bank; Implements monetary policy; Research |
| Functions of the European Central Bank | Maintain price stability; Formulate EU monetary policy; Manages official reserves of euro area countries |
| Monetary policy | The policy regarding the amount of money in circulation, interest rates & credit creation. |
Created by:
Ms D'Rosario
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