Term
| Commercial banks create money by |
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Definition
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| As the reserve ratio increases, a given of deposits will support |
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Term
| If the cash-to-deposit ratio is 0.25 and the reserve ratio is 0.25, then the amount of money created per dollar deposited in the banking system is |
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Term
| Holding money for the transactions motive implies the need to hold money for |
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Term
| In the money market the supply curve is |
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Term
| The financial sector is important to Macro |
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Definition
| [image] Channels savings back into the circular flow[image] For every asset, there is a corresponding liability |
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Term
| Money serves as a unit of |
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Definition
| o a medium of exchangeo a unit of accounto a store of wealth |
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Definition
| o Currency (50%)o Checking Accounts (45%)o Traveler’s Checks (1%) |
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Definition
| o M1o Money Market Mutual Funds (15%)o Savings Deposits (51%)o Small-Denomination time deposits (15%) |
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Term
| The Federal Reserve Bank (the FED) is the |
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Term
| Federal Reserve notes are |
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Definition
| liabilities of the FED that serve as cash in the U.S. |
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Term
| Equation for the reserve ratio |
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Definition
| [image] Reserve ratio= required + excess |
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Definition
| cash & deposits a bank keeps on hand or at the Fed |
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Term
| TOTAL AMOUNT OF DEPOSITS THAT WILL BE CREATED |
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Definition
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Term
| People hold money because of |
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Definition
| [image] The precautionary motive[image] The transaction motive[image] The speculative motive |
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Term
| financial sector expands the spending flow too much |
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Definition
| you get inflationary pressures |
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Term
| If the financial sector contracts the spending flow too much |
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