Money and interest rates (OCR A-Level Economics): Flashcards
📚Flashcards
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15 cards from this deck
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Practise the cards
15 cards from this deck
Liquidity definition
Liquidity definition
Turn asset to cash easily & quickly without losing value
Narrow Money (M0)
Narrow Money (M0)
Physical currency in circulation & checking account balances
Broad Money (M4)
Broad Money (M4)
Narrow money + wholesale & retail transactions w/ institutions
Credit Creation multiplier
Credit Creation multiplier
Money supply increase has multiplier effect on credit available
Medium of Exchange function
Medium of Exchange function
Money accepted for goods/services, no barter system needed
Unit of Account function
Unit of Account function
Standard measure of value to compare goods & services
Store of Value function
Store of Value function
Money retains value over time for saving & deferred consumption
Standard of Deferred Payment function
Standard of Deferred Payment function
Money allows credit transactions with future payment
Fractional-reserve banking
Fractional-reserve banking
Banks keep fraction as reserves, lend rest, creating new money
Quantitative Easing
Quantitative Easing
Central bank buys long-term securities to increase money supply
Fisher equation
Fisher equation
in Fisher equation
in Fisher equation
Money supply
in Fisher equation
in Fisher equation
Velocity of money (rate money circulates)
Effect of increase (V & Q constant)
Effect of increase (V & Q constant)
Proportional increase in price level (P), causing inflation
Equilibrium interest rate determination
Equilibrium interest rate determination
Where quantity of loanable funds demanded = quantity supplied