Money!
The money multiplier formula aka the monetary multiplier.
What is 1/rr?
The vertical money supply curve MS is controlled by what government body?
What is the Federal Reserve?
The difference between nominal and real interest rates is..
What is inflation?
If interest rates decrease what will happen to the price of previously issued bonds?
What is prices will increase for previously issued bonds.
Give me two examples that may increase or decrease the demand for money.
Answers vary.
If the legal reserve requirement is 25 percent, the value of the money multiplier is…
What is 4?
Loaners are ____________ and borrowers are ____________ in the market for loanable funds.
What are suppliers... demanders of loanable funds.
What is the most commonly used monetary policy tool by the federal reserve?
Interest on Reserves
Dave puts $50 under his mattress. What is this an example of?
Storage of Value
Where do banks keep their excess reserves? two possible answers.
What is in their vaults and the Federal Reserve?
Give two examples of expansionary monetary policies for both limited and ample reserves.
Answers vary.
When the government runs a budget deficit and must borrow money to meet its spending needs, the equilibrium interest rate soars. This then causes a market phenomenon called?
What is the crowding out effect?
Real GDP is decreasing. How does this effect the demand for money?
What is demand for money will fall.
The Federal Reserve uses an ample reserves system. If we are experiencing high unemployment what can the Fed do to increase aggregate demand?
What is lower administrated rates such as lowering the discount rate or interest on reserves.
An increase in savings will have what impact on real interest rates?
What is decrease real interest rates?
Jane deposits $10,000 into her demand deposit account at the bank. What happens to the M1 money supply?
What is the money supply will not change, only the form of money changes.
What composes M2 currency?
What is M2 includes M1, certificate of deposits, money market mutual funds and other time deposits.
Suppose a country with a limited reserves system buys $200,000 worth of securities on the open market. If the reserve requirement is 10 percent and the banks hold no excess reserves, what will happen to the total money supply?
What is 2 million dollars? #Dr. Evil
To fight inflation, what contractionary monetary policy can be implemented in a limited and ample reserves system?
What is: Limited Reserve System:
1. Sell bonds (OMO)
2. Raise Reserve Requirement
3. Raise Discount Rate
Ample Reserve:
Increase Administered Rates
1. Increase discount rate
2. Interest on Reserves
How do increases in foreign capital inflows impact the supply of loanable funds?
What is they increase the supply of loanable funds?
Draw the following graphs:
1. AD-AS
2. Money Market
3. Loanable Funds
4. Reserves Market
Answers will vary.