Chapter 15 Learning Objectives

Chapter 15 Learning Objectives
Define the following terms: Money- any medium that is universally accepted in an economy both by sellers of goods and service as payment for those goods and service and by creditors as payment for debt Medium of exchange-any item sellers will accept as payment
Barter-direct exchange of goods and services without the use of money Liquidity- the degree to which and object can be acquired or disposed of without much danger of any intervening loss in nominal value and with small transaction costs Transaction deposits- checkable and debitable account balances in commercial banks and other types of financial institutions such as credit unions and savings banks. Any accounts in financial institutions from which you can easily transmit debit-card and check payments without many restrictions Fiduciary monetary system- a system in which money is issued by the government and its value is based uniquely on public faith that the currency represents command over goods and services and will be accepted as payment for debts Money supply- the amount of money in circulation M1- the money supple, measured as the total value of currency plus transactions deposits plus travelers checks not issued by banks Depository institutions – Financial institutions that accepts deposits from savers and lend funds from those deposits out at interest M2 – M1 plus (1) savings deposits at all depository institutions, (2) small denomination time deposits, and (3) balances in retail money market mutual funds Central bank- a bankers bank, usually an official institution that also serves as a nations government treasury. Normally regulate commercial banks Financial intermediation- the process by which financial institutions accept savings from businesses, households, and governments and lend the savings to other businesses, households and governments Financial intermediary- institutions that transfer funds between