BJU SSE 200 Economics PowerPoint Ch. 14

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how do banks earn a profit?

- banks receive deposits from individuals in exchange for interest - banks lend deposited money to borrowers in exchange for more interest

define money

anything that is generally acceptable in exchange for goods and services

M2 =

M1 + some very liquid assets

what is NOT accepted in exchange for goods and services?

checks, credit cards, debit cards

M1 =

currency in circulation + checkable deposits

what in our economy is generally acceptable in exchange for goods and services?

currency, checkable deposits

what includes open market operations?

fed buys bonds from banks, fed gives new reserves to banks

Who creates money?

federal reserve

Banks are __ -profit businesses

for

Hyperinflation is caused by __

high rates of money growth

commodity money has __

intrinsic value

what makes money generally acceptable?

it has intrinsic value, people believe it is

what do banks do?

lend new reserves

Fiat money means__

people believe in it

money growth rate determines__

the long-run inflation rate

low rates of time preferences...

we place a greater value of consumption tomorrow

high rates of time preferences...

we place a greater value on consumption today


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