Unit 4

loan in the form of an IOU that pays interest

the total inflow of foreign funds minus the total outflow of domestic funds to other countries.

a good used as a medium of exchange that has intrinsic value in other uses.

a claim on a bank that obliges the bank to give the depositor his or her cash when demanded.

the interest rate the Fed charges on loans to banks

a bank's reserves over and above its required amount

the interest rate that banks charge other banks for loans, as determined the the FFM.

a medium of exchange whose value derives entirely from its official status as a means of payment.

a system of banking where banks are required to hold a proportion of their deposit liabilities as a reserve, but are at liberty to lend out what remains beyond this amount (not in book).

a requirement to pay money in the future

describes an asset that can be quickly converted into cash without much loss of value

a hypothetical market that brings together those who want to lend money and those who want to borrow money.

currency in circulation + checkable bank deposits + traveler's checks.

M1 + savings deposits + money market funds + small time deposits (CDs less than $100k) - "near-moneys."

M2 + large (>$100k) time deposits.

the central bank's use of changes in the quantity of money or the interest rate to stabilize the economy

a place where the demand for money and the supply of money interact to determine nominal interest rates (not in book)

a purchase or sale of government debt by the Fed.

a minimum amount of money that banks need to hold in liquid assets based on a ratio set by the Fed; the current national ratio is set at 10%

the fraction of bank deposits that a bank holds as reserves.

an accounting fact that states that savings and investment spending are always equal for the economy as a whole