Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
Money Currency in circulation Checkable bank deposits Money supply Medium of exchange Store of value Unit of account Commodity money Commodity-backed money Fiat money Monetary aggregate Near-moneys Bank reserves T-account Reserve ratio Bank run Deposit insurance Reserve requirements Discount window Excess reserves Monetary base Money multiplier Central bank Federal funds market Federal funds rate Discount rate Open-market operation Commercial bank Investment bank Savings and loan (thrift) Leverage Balance sheet effect Vicious cycle of deleveraging Subprime lending Securitization | a measure used to set prices and make economic calculations. the ratio of the money supply to the monetary base. an overall measure of the money supply. The most common monetary aggregates in the United States are M1, which includes currency in circulation, traveler’s checks, and checkable bank deposits, and M2, which includes M1 as well as near-moneys. a simple tool that summarizes a business’s financial position by showing, in a single table, the business’s assets and liabilities, with assets on the left and liabilities on the right. a medium of exchange that has no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods on demand. a bank that trades in financial assets and is not covered by deposit insurance. the rate of interest the Federal Reserve charges on loans to banks that fall short of reserve requirements. an asset that is a means of holding purchasing power over time. a phenomenon in which many of a bank’s depositors try to withdraw their funds because of fears of a bank failure. a bank that accepts deposits and is covered by deposit insurance. a medium of exchange that is a good, normally gold or silver, that has intrinsic value in other uses. the total value of financial assets in the economy that are considered money. financial assets that can’t be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits. a protection against bank runs in which the Federal Reserve stands ready to lend money to banks in trouble. bank accounts on which people can write checks. a purchase or sale of U.S. Treasury bills by the Federal Reserve, normally through a transaction with a commercial bank. a guarantee that a bank’s depositors will be paid even if the bank can’t come up with the funds, up to a maximum amount per account. a financial market that allows banks that fall short of reserve requirements to borrow funds from banks with excess reserves. the degree to which a financial institution is financing its investments with borrowed funds. the reduction in a firm’s net worth from falling asset prices. the fraction of bank deposits that a bank holds as reserves. In the United States, the minimum required reserve ratio is set by the Federal Reserve. currency held by banks in their vaults plus their deposits at the Federal Reserve. any asset that can easily be used to purchase goods and services. lending to home-buyers who don’t meet the usual criteria for borrowing. an institution that oversees and regulates the banking system and controls the monetary base. deposit-taking banks, usually specialized in issuing home loans. the interest rate at which funds are borrowed and lent in the federal funds market. actual cash held by the public. rules set by the Federal Reserve that set the minimum reserve ratio for banks. For checkable bank deposits in the United States, the minimum reserve ratio is set at 10%. an asset that individuals acquire for the purpose of trading for goods and services rather than for their own consumption. a medium of exchange whose value derives entirely from its official status as a means of payment. describes the sequence of events that takes place when a firm’s asset sales to cover losses produce negative balance sheet effects on other firms and force creditors to call in their loans, forcing sales of more assets and causing further declines in asset prices. the sum of currency in circulation and bank reserves. the pooling of loans and mortgages made by a financial institution and the sale of shares in such a pool to other investors. a bank’s reserves over and above the reserves required by law or regulation. |