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Macroeconomics 11+12
Macroeconomics Chapters 11+12
| Question | Answer |
|---|---|
| money | the set of assets in an economy that people use to buy goods and services |
| medium of exchange | an item that buyers give to sellers when they want to purchase goods and services |
| unit of account | the yardstick people use to post prices and record debts |
| store of value | an item that people can use to transfer purchasing power from the present to the future |
| commodity money | money that takes the form of a commodity with intrinsic value |
| fiat money | money without intrinsic value that is used as money because of government decree |
| currency | the paper bills and coins in the hands of the public |
| demand deposits | balances in bank accounts that depositors can access on demand by writing a check |
| Federal Reserve | the central bank of the United States |
| central bank | an institution designed to oversee the banking system and regulate the quantity of money in the economy |
| money supply | the quantity of money available in the economy |
| monetary policy | the setting of the money supply by policymakers in the central bank |
| reserves | deposits that banks have received but have not loaned out |
| fractional-reserve banking | a banking system in which banks hold only a fraction of deposits as reserves |
| reserve ratio | the fraction of deposits that banks hold as reserves |
| money multiplier | the amount of money the banking system generates with each dollar of reserves |
| bank capital | the resources a bank's owners have put into the institution |
| leverage | the use of borrowed money to supplement existing funds for purpose of investment |
| leverage ratio | the ratio of assets to bank capital |
| capital requirement | a government regulation specifying a minimum amount of bank capital |
| open-market operations | the purchase and sale of U.S. government bonds by the Fed |
| discount rate | the interest rate on the loans that the Fed makes to banks |
| reserve requirements | regulations on the minimum amount of reserves that banks must hold against deposits |
| federal funds rate | the interest rate at which banks make overnight loans to one another |
| quantity theory of money | quantity of money available determines price level and growth rate determines the inflation rate |
| nominal variables | variables measured in monetary units |
| real variables | variables measured in physical units |
| classical dichotomy | the theoretical separation of nominal and real variables |
| monetary neutrality | changes in the money supply do not affect real variables |
| velocity of money | the rate at which money changes hands |
| quantity equation | quantity of money * velocity of money =price of output * amount of output |
| not the quantity equation | quantity of money * amount of output = price of output * velocity of money |
| inflation tax | the revenue the government raises by creating money |
| Fisher effect | one-for-one adjustment of the nominal interest rate to the inflation rate |
| shoeleather costs | resources wasted when inflation encourages people to reduce their money holdings |
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