Money, Banking, and Finance

money anything that serves as a medium of exchange, a unit of account, and a store of value
medium of exchange anything that is used to determine value during the exchange of goods and services
barter the direct exchange of one set of goods or services for another
unit of account a means for comparing the values of goods and services
store of value something that keeps its value if it is stored rather than spent
currency coins and paper bills used as money
commodity money objects that have value in and of themselves and that are also used as money
representative money objects that have value because the holder can exchange them for something else of value
specie coined money, usually gold or silver, used to back paper money
fiat money objects that have value because a government has decreed that they are an acceptable means to pay debts
money supply all the money available in the United States economy
liquidity the ability to be used as, or directly converted into, cash
demand deposit money in a checking account that can be paid out “on demand”, or at any time
money market mutual funds a fund that pools money from small savers to purchase short-term government and corporate securities
fractional reserve banking a banking system that keeps only a fraction of its funds on hand and lends out the remainder
default failing to pay back loan
mortgage a specific type of loan that is used to buy real estate
credit card a card entitling its owner to buy goods and services based on the owner’s promise to pay for those goods and services
interest the price paid for the use of borrowed money
principal the amount of money borrowed
debit card a card used to withdraw money from a bank account

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