The Fed’s Toolbox
This tool involves buying and selling government bonds to influence the money supply.
Open Market Operations
This branch of government controls fiscal policy.
What is Congress (and the Executive branch)?
A general rise in prices over time is called this.
What is inflation?
GDP stands for this.
What is Gross Domestic Product?
When the Fed buys bonds, this happens to the money supply.
What is it increases (expands)?
Increasing government spending during a recession is an example of this type of fiscal policy.
What is expansionary fiscal policy?
The Fed’s long-run inflation target is approximately this percent.
What is 2%?
GDP measures the total value of this within a country in a year.
What are final goods and services?
Monetary policy is set by the ___________ ________ ______ ______ (four words).
What is FOMC - Federal Open Market Committee
This is the interest rate the Fed charges banks to borrow directly from it.
What is the Discount Rate?
When government revenues exceed spending, this occurs.
What is a budget surplus?
When unemployment is very low and prices rise quickly, the economy may be described as this.
What is overheating?
If GDP is falling for two consecutive quarters, this may be happening.
What is a recession?
Raising Interest on Reserves encourages banks to do this.
What is keep money at the Fed instead of lending it?
The total accumulation of past government deficits is called this.
What is the national debt?
High inflation and high unemployment at the same time is called this.
What is stagflation?
The government runs a deficit when this happens.
What is spending exceeds revenue?
This tool is rarely used because it dramatically changes how much banks can lend.
What are Reserve Requirements?
Raising taxes to reduce inflation is an example of this type of fiscal policy.
What is contractionary fiscal policy?
The relationship that suggests inflation and unemployment often move in opposite directions in the short run.
What is the Phillips Curve?
Some economists argue high debt becomes a problem when this ratio gets too large.
What is Debt-to-GDP ratio?