the total value of financial assets in the economy that are considered money.
open-market operation
a purchase or sale of U.S. Treasury bills by the Federal Reserve, undertaken to change the monetary base, which in turn changes the money supply.
money multiplier
the ratio of the money supply to the monetary base; indicates the total number of dollars created in the banking system by each $1 addition to the monetary base.
excess reserves
a bank's reserves over and above the reserves required by law or regulation
budget surplus
the difference between tax revenue and government spending when tax revenue exceeds government spending.
federal funds market
the financial market that allows banks that fall short of reserve requirements to borrow funds from banks with excess reserves.
discount window
an arrangement in which the Federal Reserve stands ready to lend money to banks.
interest rate
the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year.
financial asset
a paper claim that entitles the buyer to future income from the seller. Loans, stocks, bonds, and bank deposits are types of financial assets.
federal funds rate
the interest rate at which funds are borrowed and lent in the federal funds market.
