Banking Unit Vocab

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Federal Reserve System (Fed)

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privately owned, publicly controlled, central bank of the United States

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Barter economy

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Moneyless economy relying on trade.

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Commodity money

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Money with alternative uses as economic goods (e.g., gunpowder, flour, corn).

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fiat money

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money by government decree; has no alternative value or use as a commodity.

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Monetary unit

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Standard unit of currency in a country’s money supply; American dollar, British pound, etc.

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Medium of exchange

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money or other substance generally accepted as payment for goods and services; one of the three functions of money.

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Measure of value

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One of the three functions of money that allows it to serve as a common denominator to measure value.

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Demand deposit accounts

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Funds can be withdrawn via check or debit card.

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M1: Narrow definition of money supply as medium of exchange; includes coins, currency, checks, demand deposits, traveler's checks.

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Narrow definition of money supply as medium of exchange; includes coins, currency, checks, demand deposits, traveler's checks.

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M2: Broad definition of money supply as medium of exchange & store of value; includes M1 + savings deposits, time deposits, money market funds.

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Broad definition of money supply: M1 + savings deposits, time deposits, money market funds.