Monetary System Overview

Money that has value solely because the government says it does.

Money that has value because it is made from a valuable commodity, like gold.

A system where the value of money is directly tied to the value of gold.

The direct exchange of goods without using money.

A situation where both parties involved in a trade have what the other wants.

The difficulties of coordinating trade when there is no common medium of exchange.

The goods or services that are widely accepted as payment for transactions.

An economic system that relies on informal trade and exchange, often seen in situations like prisoner of war camps.

The percentage of deposits that banks are required to hold in reserve.

The process by which banks create money by lending out a portion of their deposits.

The amount of money that an initial deposit can generate through the process of money creation.

The ability of banks to create new money by lending out deposits.

The process of transferring funds from lenders to borrowers for investment.

The value of a bank's assets minus its liabilities.

The ratio of a bank's assets to its capital.

Regulations that require banks to hold a certain amount of capital as a percentage of their assets.

A system where the government has the sole right to print and control the amount of money circulating in the economy.

A type of money that doesn't derive its value from any intrinsic qualities, but rather from its acceptance in trading.

A cryptocurrency with no intrinsic value, meaning it's not backed by a physical commodity or government decree. Its value hinges on people's acceptance of it as a valid means of exchange.

The total amount of money circulating in an economy.

An institution that controls the money supply and sets interest rates within a country.

The fluctuating price of a specific asset over a short period of time.

The risk that a specific asset might lose value.

Funds held in checking accounts, easily accessible and used for transactions, making them part of the money supply.

A measure of the money supply that includes currency, demand deposits, traveler's checks, and other checkable deposits.

A broader measure of the money supply that includes M1 plus retail money market mutual funds, savings deposits (including money market deposit accounts), and small time deposits.

Assets that can be easily used for transactions, like checking accounts or savings accounts, are considered part of the money supply.

A type of mutual fund that allows investors to write checks against their accounts, although restrictions may apply.

The Federal Reserve Bank calculates and publishes multiple measures of the money supply, including M1 and M2, for economic analysis and policymaking.

Credit cards are not considered part of the money supply because they represent a loan, not a medium of exchange.

The proportion of a bank's assets financed by its owners' equity.

The situation where a bank's assets are worth less than its liabilities, resulting in negative equity.

A sudden and widespread withdrawal of deposits from a bank, often driven by fear of bank failure.

A simplified model used to understand how changes in the money supply affect the total amount of money in an economy.

The action of a central bank injecting money into the economy, directly impacting the money supply. It's a tool used to stimulate economic activity.

The interest rate paid by the Federal Reserve to banks on their reserves held at the Fed.

A policy by the Federal Reserve to purchase long-term government bonds to keep their prices up and long-term interest rates down.

The total amount of currency in circulation and commercial banks' reserves held at the Fed.

The ratio of reserves held by banks to their deposits.

A situation where the monetary base expands significantly, but the money supply grows at a slower rate.

The Fed's role as the lender of last resort, providing liquidity to financial institutions in times of crisis.

The purchase and sale of government securities by the Federal Reserve to influence the money supply.