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 Liquid 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 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 phenomenon in which many of a bank’s depositors try to withdraw their funds because of fears of a bank failure lending to homebuyers who don’t meet the usual criteria for borrowing the financial market that allows banks that fall short of reserve requirements to borrow funds from banks with excess reserves the pooling of loans and mortgages made by a financial institution and the sale of shares in such a pool to other investors an institution that oversees and regulates the banking system and controls the monetary base 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 the sum of currency in circulation and bank reserves. a bank that trades in financial assets and is not covered by deposit insurance. actual cash held by the public 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 describes an asset that can be quickly converted into cash without much loss of value the reduction in a firm’s net worth from falling asset prices the total value of financial assets in the economy that are considered money 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% a measure used to set prices and make economic calculations 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 purchase or sale of U.S. Treasury bills by the Federal Reserve, normally through a transaction with a commercial bank a financial asset that can’t be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits any asset that can easily be used to purchase goods and services a bank that accepts deposits and is covered by deposit insurance. a bank’s reserves over and above the reserves required by law or regulation currency held by banks in their vaults plus their deposits at the Federal Reserve bank accounts on which people can write checks the rate of interest the Federal Reserve charges on loans to banks that fall short of reserve requirements 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 an asset that individuals acquire for the purpose of trading for goods and services rather than for their own consumption a medium of exchange that is a good, normally gold or silver, that has intrinsic value in other uses a medium of exchange whose value derives entirely from its official status as a means of payment the interest rate at which funds are borrowed and lent in the federal funds market an asset that is a means of holding purchasing power over time the ratio of the money supply to the monetary base. 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 a protection against bank runs in which the Federal Reserve stands ready to lend money to banks in trouble the degree to which a financial institution is financing its investments with borrowed funds deposit-taking banks, usually specialized in issuing home loans |
Money, p. 482
Liquid, p. 482
Currency in circulation, p. 482
Checkable bank deposits, p. 482
Money supply, p. 482
Medium of exchange, p. 483
Store of value, p. 483
Unit of account, p. 484
Commodity money, p. 484
Commodity-backed money, p. 484
Fiat money, p. 485
Monetary aggregate, p. 485
Near-moneys, p. 485
Bank reserves, p. 488
T-account, p. 488
Reserve ratio, p. 489
Bank run, p. 490
Deposit insurance, p. 490
Reserve requirements, p. 491
Discount window, p. 491
Excess reserves, p. 494
Monetary base, p. 495
Money multiplier, p. 496
Central bank, p. 497
Federal funds market, p. 498
Federal funds rate, p. 498
Discount rate, p. 499
Open-market operation, p. 499
Commercial bank, p. 506
Investment bank, p. 506
Savings and loan (thrift), p. 506
Leverage, p. 507
Balance sheet effect, p. 507
Vicious cycle of deleveraging, p. 507
Subprime lending, p. 508
Securitization, p. 508