Multipliers and the Mystery of the Magic Money
Glossary terms from:
A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.
An arrangement by which a bank holds funds on behalf of a depositor. Also, the balance of funds held under such an arrangement, credited to and subject to withdrawal by the depositor.
Board of Governors
The Federal Reserve's governing and monetary policy-making body; consists of seven governors appointed by the President to staggered 14-year terms.
To receive and use something belonging to somebody else, with the intention of returning or repaying it--often with interest in the case of borrowed money.
Money in the form of paper currency or coins (as distinct from checks, money orders or credit).
People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services.
The money in circulation in any country.
The quantity of a good or service that buyers are willing and able to buy at all possible prices during a period of time.
Money put into a financial account. Also, to place money in a financial account.
The interest rate the Federal Reserve charges commercial banks for loans.
The study of how people, firms and societies choose to allocate scarce resources with alternative uses.
A bank's cash reserves beyond the required reserves, which can be loaned.
Goods and services produced in one nation and sold in other nations.
The central bank of the United States. Its main function is controlling the money supply through monetary policy. The Federal Reserve System divides the country into 12 districts, each with its own Federal Reserve bank. Each district bank is directed by its nine-person board of directors. The Board of Governors, which is made up of seven members appointed by the President and confirmed by the Senate to 14-year terms, directs the nation's monetary policy and the overall activities of the Federal Reserve. The Federal Open Market Committee is the official policy-making body; it is made up of the members of the Board of Governors and five of the district bank presidents.
Economic units that demand productive resources from households and supply goods and services to households and government agencies.
A very rapid rise in the overall price level.
Goods and services bought from sellers in another nation.
A rise in the general or average price level of all the goods and services produced in an economy. Can be caused by pressure from the demand side of the market (demand-pull inflation) or pressure from the supply side of the market (cost-push inflation).
Money paid regularly, at a particular rate, for the use of borrowed money.
The purchase of capital goods (including machinery, technology or new buildings) that are used to produce goods and services. In personal finance, the amount of money invested in stocks, bonds, mutual funds and other investment instruments.
To grant someone the use of something, on condition that the object borrowed or its equivalent will be returned (often with interest, in the case of money).
Changes in the supply of money and the availability of credit initiated by a nation's central bank to promote price stability, full employment and reasonable rates of economic growth.
Anything that is generally accepted as final payment for goods and services; serves as a medium of exchange, a store of value and a standard of value. Characteristics of money are portability, stability in value, uniformity, durability and acceptance.
Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.
Open Market Operations
The buying and selling of government bonds by the Federal Reserve to control bank reserves and the money supply.
The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.
In a credit arrangement, the total amount spent during the billing cycle.
A decline in the rate of national economic activity, usually measured by a decline in real GDP for at least two consecutive quarters (i.e., six months).
The minimum amount of cash reserves (a percentage of the deposits) in dollars that a bank is required by law to keep on hand or with the Federal Reserve.
The fraction of banks' deposits that they are required by law to keep on hand or with the Federal Reserve.
The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time. Normally, as the price of a good or service rises (or falls), the quantity supplied of the good or service rises (or falls).
Value of Money
The ability of money to buy goods and services. A wide variety of items has been used as money. Money need not have any intrinsic value. It is people's willingness to accept it that gives it value.
Effort applied to achieve a purpose or result, often for pay; skills and knowledge put to use to get something done; employment at a job or in a position; occupation, profession, business, trade, craft, etc.