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Chapter 1
14 cards·by vaughmat
What are the four characteristics of money
Unit of account, medium of exchange, stored value, standard of deferred payment
What is an Unit of account?
It is a standard of value, an acceptable way to measure value
What is a "store of value"
An asset, or something that generates income
What is a "standard of deferred payment"
the currency of unit of account for all debts, public and private
What is "medium of exchange"
an expected method of payment for debts, public and private
What is a derivative
an asset, such as a future, forward or option that have their values derived from the value of an
underlying asset.
What is risk
The price of uncertainty
What is diversification?
The spreading of risk by purchasing many different types of assets
What is "monetary base"
the sum of currency in circulation and bank reserves at the domestic central bank
What are the three ways the fed measures money?
M1,M2,M3
What is the main difference between M1,M2,M3?
Liquidity
What is "M1"
Cash and its closest Substitutes, checking accounts, travelers check, money orders
What is "M2"
includes M1 + interest baring accounts that are highly liquid, money mutuals, savings
accounts
What is "M3"
Includes M2 and larger institutionally held accounts