| Question | Answer |
| The liquid assets held by banks and individuals | Money Supply |
| Extra money in the economy can cause | Inflation |
| A measure of how quickly things may be
converted to something of value like cash | Liquidity |
| Money that can be spent immediately, includes paper and metallic money and things such as checking accounts | M1 |
| All the money in M1 plus short term investments | M2 |
| Represents all available liquid money. It is M2 minus time deposits and includes all money market funds | MZM |
| Various measures used by the Federal Reserve
to add up components of the money supply | Aggregate Measures |
| Base money supply | M1 |
| Money that is based on some item of value such as the Gold Standard | Commodity Money |
| Money that is deemed legal tender by the
government | Fiat Money |
| Who is the legal authority that
makes decisions regarding money | Federal Reserve |
| Maintains sufficient deposits to cover
anticipated withdrawals | Fractional-Reserve System |
| performs the task of printing currency. | The Bureau of Engraving and Printing |
| Vault cash (cash on hand) and the required
percentage amounts on deposit in the Federal
Reserve District Bank | Primary Reserves |
| Securities the bank purchases from the federal
government and deposits that are due from other
banks | Secondary Reserves |
| Reserves held by a bank beyond its reserve
requirement | Excess Reserves |
| A record of financial transactions | Ledger Entries |
| The primary way banks make money | Interest Rates |
| Interest rates are determined by | Market forces
Economic conditions at large
The inflation outlook
The cost of money |
| Which type of interest rate does the Fed control | Discount Rate |
| The amount of interest charged for short-term,
interbank loans | Federal Funds Rate |
| The interest rate that the Federal Reserve sets and
charges for loans to member banks | Discount Rate |
| The rate that banks charge their best and most
reliable customers | Prime Rate |
| The goals of the Federal Reserve’s monetary
policy are to | 1. Maintain economic growth
2. Stabilize prices
3. Help international payments flow |
| Money on deposit, minus _____________, can be loaned by banks to customers. | Reserve Requirement |
| The _____________________________ is a phenomenon that creates new deposits from lending | Multiplier Effect |
| The official currency of the United States can be classified as _________ | Fiat Money |
| The _________ rate is usually the same among major banks | Prime |
