Macroeconomics: Money, Banks, and the Federal Reserve System

Assets that people are generally willing to accept in exchange for goods and services or for payment of debts

Anything of value owned by a person or a firm

A good used as money that also has value independent of its use as money

What are the 4 functions of money?

Money, such as paper currency, that is authorized by a central bank or governmental body and that does not have to be exchanged by the central bank for gold or some other commodity money

The narrowest definition of the money supply: The sum of currency in circulation, checking account deposits in banks, and holdings of traveler's checks

The government's profit from issuing fiat money is called:

A broader definition of the money supply: M1 plus savings account balances, small-denomination time deposits, balances in money market deposit accounts in banks, and noninstitutional money market fund shares

Deposits that a bank keeps as cash in its vault or on deposit with the Federal Reserve

Reserves that a bank is legally required to hold, based on its checking account deposits

The minimum fraction of deposits banks are required by law to keep as reserves

Reserves that banks hold over and above the legal requirement

Reserves are liabilities/assets?

Deposits are liabilities/assets?

The ratio of the amount of deposits created by banks to the amount of new reserves