Chapter 29 - The Monetary System

Double coincidence

________ of wants: the unlikely occurrence that two people each have a good or service that the other wants.

credit crunch

A(n) ________ is a shortage of capital that induces banks to reduce lending.

Fiat

________ money: money without intrinsic value that is used as money by government decree.

Barter

________: the exchange of one good or service for another to obtain the things they need.

fraction of deposits

When banks hold only a(n) ________ in reserve, the banking system creates money.

Store of value

________: an item that people can use to transfer purchasing power from the present to the future.

balance sheet

A(n) ________ is an accounting statement where the assets and liabilities are equivalent.

Medium of exchange

________: an item that buyers give to sellers when they want to purchase goods and services.

Reserves

________: deposits that banks have received but have not loaned out.

Term Action Facility

________: the quantity of funds the Feds wanted to lend to banks, where banks bid on those funds.

Currency

________: the paper bills and coins in the hands of the public.

Lender

________ of last resort: a(n) ________ to those who can not borrow anywhere else.

wealth

When allocating ________, the liquidity of each asset has to be balanced.

Monetary policy

________: the setting of the money supply by policymakers in the central bank.

Unit of account

________: the yardstick people use to post prices and record debts.

Liquidity

________: the ease with which an asset can be converted into the economys medium of exchange.

100 percent reserve banking

A(n) ________ is an imaginary economy where all deposits are held as reserves.

Intrinsic value

________ means an item would have value even if it were not used as money.

Reserve ratio

________: the fraction of deposits that banks hold as reserves.

Leverage

________: the use of borrowed money to supplement existing funds for purposes of investment.

Central bank

________: an institution designed to oversee the banking system and regulate the quantity of money in the economy.

reserve requirement

Banks can hold above the ________, called excess reserves.

Bank capital

________: the resources a banks owners have put into the institution.

Discount rate

________: the interest rate on the loans that the Fed makes to banks.

Demand deposits

________: balances in bank accounts that depositors can access on demand by writing a check.

fraction of deposits

Fractional- reserve banking: a banking system in which banks hold only a(n) ________ as reserves.