14.6: Key Terms
- Page ID
- 180863
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- asset
- item of value that a firm or an individual owns
- asset–liability time mismatch
- customers can withdraw a bank’s liabilities in the short term while customers repay its assets in the long term
- balance sheet
- an accounting tool that lists assets and liabilities
- bank capital
- a bank’s net worth
- barter
- literally, trading one good or service for another, without using money
- coins and currency in circulation
- the coins and bills that circulate in an economy that are not held by the U.S Treasury, at the Federal Reserve Bank, or in bank vaults
- commodity money
- an item that is used as money, but which also has value from its use as something other than money
- commodity-backed currencies
- dollar bills or other currencies with values backed up by gold or another commodity
- credit card
- immediately transfers money from the credit card company’s checking account to the seller, and at the end of the month the user owes the money to the credit card company; a credit card is a short-term loan
- debit card
- like a check, is an instruction to the user’s bank to transfer money directly and immediately from your bank account to the seller
- demand deposit
- checkable deposit in banks that is available by making a cash withdrawal or writing a check
- depository institution
- institution that accepts money deposits and then uses these to make loans
- diversify
- making loans or investments with a variety of firms, to reduce the risk of being adversely affected by events at one or a few firms
- double coincidence of wants
- a situation in which two people each want some good or service that the other person can provide
- fiat money
- has no intrinsic value, but is declared by a government to be the country's legal tender
- financial intermediary
- an institution that operates between a saver with financial assets to invest and an entity who will borrow those assets and pay a rate of return
- liability
- any amount or debt that a firm or an individual owes
- M1 money supply
- a narrow definition of the money supply that includes currency and checking accounts in banks, and to a lesser degree, traveler’s checks.
- M2 money supply
- a definition of the money supply that includes everything in M1, but also adds savings deposits, money market funds, and certificates of deposit
- medium of exchange
- whatever is widely accepted as a method of payment
- money
- whatever serves society in four functions: as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment.
- money market fund
- the deposits of many investors are pooled together and invested in a safe way like short-term government bonds
- money multiplier formula
- total money in the economy divided by the original quantity of money, or change in the total money in the economy divided by a change in the original quantity of money
- net worth
- the excess of the asset value over and above the amount of the liability; total assets minus total liabilities
- payment system
- helps an economy exchange goods and services for money or other financial assets
- reserves
- funds that a bank keeps on hand and that it does not loan out or invest in bonds
- savings deposit
- bank account where you cannot withdraw money by writing a check, but can withdraw the money at a bank—or can transfer it easily to a checking account
- smart card
- stores a certain value of money on a card and then one can use the card to make purchases
- standard of deferred payment
- money must also be acceptable to make purchases today that will be paid in the future
- store of value
- something that serves as a way of preserving economic value that one can spend or consume in the future
- T-account
- a balance sheet with a two-column format, with the T-shape formed by the vertical line down the middle and the horizontal line under the column headings for “Assets” and “Liabilities”
- time deposit
- account that the depositor has committed to leaving in the bank for a certain period of time, in exchange for a higher rate of interest; also called certificate of deposit
- transaction costs
- the costs associated with finding a lender or a borrower for money
- unit of account
- the common way in which we measure market values in an economy