Macroeconomics
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| Medium of Exchange | Any item sellers generally accept and buyers generally use to pay for a good or service; money; a convenient means of exchanging goods and services without engaging in barter.
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| Store of Value | An asset set aside for future use; one of the three functions of money.
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| Asset Demand for Money | The amount of money people want to hold as a store of value; 1/interest rate
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| Money Market | The market in which the demand for and the supply of money determine the interest rate (or the level of interest rates) in the economy.
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| Unit of Account | A standardized unit in which prices can be stated and the value of goods and services can be compared; one of the three functions of money
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| M1 | The most narrowly defined money supply, equal to the currency in the hands of the public and the checkable deposits of commercial banks and thrift institutions.
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| M2 | A more broadly defined money supply, M2= M1+Saving Deposits (MMDAs)+small time deposits+MMMFs
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| M3 | A very broadly defined money supply,
M3=M2+large time deposits (100,000+)
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| Total Demand for Money | Transactions Demand for Money+Asset Demand for Money
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| Required Reserve | The funds that banks and thrifts must deposit with the Federal REserve Bank (or hold as vault cash) to meet the legal reserve requirement; a fixed percentage of the bank's or thrift's checkable deposits
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| Reserve Ratio | Commercial bank's required reserves/ Commercial bank's checkable-deposit liabilities
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| Excess Reserve | Actual reserves-Required reserves
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| Federal Funds Rate | The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves
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| Money Multiplier | 1/required reserve ratio
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| Open Market Operations | The buying and selling of U.S government securities by the Federal Reserve Banks for the purposes of carrying out monetary policy.
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| Discount Rate | The interest rate that the Federal Reserve Banks charge on the loans they make to commercial banks and thrift institutions
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| Easy Money (Expansionary Monetary Policy) | Federal Reserve Banks makes banks loans less expensive and more available and thereby increase aggregate demand, output and employment. Fed buys securities, lowers reserve ratio and lowers the discount rate
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| Tight Money (Restrictive Monetary Policy) | Federal Reserve Bank tightens supply of money in order to reduce spending and control inflation. Fed sells securities, increases the reserve ratio and raises the discount rate.
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| Prime Interest Rate | The benchmark interest rate that banks use as a reference point for a wide range of loans to businesses and individuals.
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| Velocity of Money | The number of times per year the average dollar is spend on goods and services.
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| Phillips Curve | A curve showing the relationship between the unemployment rate (x-axis) and the annual rate of increase in the price level (y-axis).
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| Laffer Curve | A curve relating the government tax rates and tax revenues and on which a particular tax rate (between zero and 100 percent) maximizes tax revenues.
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| Aggregate Supply Shocks | Sudden, large changes in resource costs that shift an economy's aggregate supply curve
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