Key Terms

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.

Question

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