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Econ Final- Ch.14,15,16, and 19

Econ Final- Ch.14,15,16, and 19 - Econ 102 Chapter...

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Econ. 102- Chapter 14-19-Terms Chapter 14- Money and The Financial System Double coincidence of Wants- two trades are willing to exchange their products directly. Money- Anything that is generally accepted in exchange for goods and services. Medium of Exchange- anything that facilitates trade by being generally accepted by all parties in payment for goods or services. Commodity money- anything that serves both as money and as a commodity; money that has basic value. Unit of account- a common unit for measuring the value of each good or service. Store of Value- anything that retains its purchasing power over time. Gresham’s Law- people tend to trade away inferior money and hoard the best. Seigniorage- the difference between the face value of money and the cost of supplying it; the “profit” from issuing money. Token Money- money whose face value exceeds its cost of production. Check- a written order instructing the bank to pay someone from an amount deposited. Fractional reserve banking system- bank reserves amount to only a fraction on deposit with the bank. Bank Notes- originally, pieces of paper promising a specific amount of gold or silver to anyone who presented them to issuing banks for redemption; today, Federal Reserve notes are mere paper money. Representative money- bank notes that exchange for a specific commodity, such as gold. Flat money- money not redeemable for any commodity; its status as money is conferred initially by government decree but eventually by common experience. Legal Tender- U.S. currency that constitutes a valid and legal offer of payment of debt. Financial intermediaries- institutions such as banks, mortgage companies, and finance companies, those serve as go-betweens, borrowing from people who have saved to make loans to others.
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Depository Institutions- commercial banks and thrift institutions; financial institutions that accept deposits from the public. Commercial Banks- depository institutions that historically made short-term loans primarily to businesses. Thrift institutions, or thrifts- savings banks and credit unions; depository institutions that historically lent money to households.
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