Money/Related Articles

Glossary

• Bill of Exchange [r]: A written order to pay the holder a stated sum of money at a stated date (otherwise known as a "draft", the person who is paid being termed the "drawer"). ^[e]
• Fiat money [r]: money whose value is determined solely by government order, or "fiat" (as distinct from commodity money that has value because of its scarcity or cost of production). ^[e]
• Liquidity [r]: (i) The quantity of available assets in its possession that an organisation could rapidly exchange for cash (assets that cannot be exchanged for cash at a particular time are considered to be "illiquid" at that time); (ii) the funding that is unconditionally available to settle claims through monetary authorities (termed "official liquidity"). ^[e]
• Liquidity trap [r]: a state of the economy in which an expansionary monetary policy has no effect upon output. ^[e]
• Monetary base [r]: currency in circulation plus bank vault cash plus deposits held by banks at the central bank (termed "high-powered money" in the US, and referred to as M0 in the UK). ^[e]
• Money market [r]: A market for short-term debt instruments (generally of maturity after less than one year) such as certificates of deposit, commercial paper, and Treasury bills. ^[e]
• Open market operation [r]: The buying and selling of government securities in order to influence the level of banking reserves. ^[e]
• Reserves (banking) [r]: A bank's holding of deposits at its central bank plus the currency held in its vaults. ^[e]
• Reserve ratio [r]: The ratio of a bank's reserves to its deposits, a minimum value of which is set by its central bank with the effect of limiting the proportion of its deposits that the bank is permitted to lend. ^[e]