Term
Commercial banks create money by |
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As the reserve ratio increases, a given of deposits will support |
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If the cash-to-deposit ratio is 0.25 and the reserve ratio is 0.25, then the amount of money created per dollar deposited in the banking system is |
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Holding money for the transactions motive implies the need to hold money for |
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Term
In the money market the supply curve is |
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The financial sector is important to Macro |
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Definition
[image] Channels savings back into the circular flow[image] For every asset, there is a corresponding liability |
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Term
Money serves as a unit of |
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Definition
o a medium of exchangeo a unit of accounto a store of wealth |
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Definition
o Currency (50%)o Checking Accounts (45%)o Traveler’s Checks (1%) |
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o M1o Money Market Mutual Funds (15%)o Savings Deposits (51%)o Small-Denomination time deposits (15%) |
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Term
The Federal Reserve Bank (the FED) is the |
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Federal Reserve notes are |
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Definition
liabilities of the FED that serve as cash in the U.S. |
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Equation for the reserve ratio |
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Definition
[image] Reserve ratio= required + excess |
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cash & deposits a bank keeps on hand or at the Fed |
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Term
TOTAL AMOUNT OF DEPOSITS THAT WILL BE CREATED |
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Term
People hold money because of |
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Definition
[image] The precautionary motive[image] The transaction motive[image] The speculative motive |
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Term
financial sector expands the spending flow too much |
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Definition
you get inflationary pressures |
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If the financial sector contracts the spending flow too much |
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