Chapter 4 Test Review
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| The liquid assets held by banks and individuals | Money Supply
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| Extra money in the economy can cause | Inflation
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| A measure of how quickly things may be converted to something of value like cash | Liquidity
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| Money that can be spent immediately, includes paper and metallic money and things such as checking accounts | M1
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| All the money in M1 plus short term investments | M2
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| Represents all available liquid money. It is M2 minus time deposits and includes all money market funds | MZM
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| Various measures used by the Federal Reserve to add up components of the money supply | Aggregate Measures
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| Base money supply | M1
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| Money that is based on some item of value such as the Gold Standard | Commodity Money
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| Money that is deemed legal tender by the government | Fiat Money
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| Who is the legal authority that makes decisions regarding money | Federal Reserve
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| Maintains sufficient deposits to cover anticipated withdrawals | Fractional-Reserve System
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| performs the task of printing currency. | The Bureau of Engraving and Printing
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| Vault cash (cash on hand) and the required percentage amounts on deposit in the Federal Reserve District Bank | Primary Reserves
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| Securities the bank purchases from the federal government and deposits that are due from other banks | Secondary Reserves
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| Reserves held by a bank beyond its reserve requirement | Excess Reserves
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| A record of financial transactions | Ledger Entries
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| The primary way banks make money | Interest Rates
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| Interest rates are determined by | Market forces
Economic conditions at large
The inflation outlook
The cost of money
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| Which type of interest rate does the Fed control | Discount Rate
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| The amount of interest charged for short-term, interbank loans | Federal Funds Rate
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| The interest rate that the Federal Reserve sets and charges for loans to member banks | Discount Rate
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| The rate that banks charge their best and most reliable customers | Prime Rate
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| The goals of the Federal Reserve’s monetary policy are to | 1. Maintain economic growth
2. Stabilize prices
3. Help international payments flow
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| Money on deposit, minus _____________, can be loaned by banks to customers. | Reserve Requirement
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| The _____________________________ is a phenomenon that creates new deposits from lending | Multiplier Effect
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| The official currency of the United States can be classified as _________ | Fiat Money
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| The _________ rate is usually the same among major banks | Prime
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