Fiscal Policy
Two options for expansionary fiscal policy
Increase government spending and decrease taxes
Three options for expansionary monetary policy?
BELL
Buy bonds, Lower reserve requirement and Lower discount rate
A depreciated currency leads to (increased/decreased) net exports and a current account (deficit/surplus)
Increased
Surplus
Put Actual Reserves, Required Reserves and Excess Reserves in an equation.
AR = RR + ER
The Phillips Curve is a short run tradeoff between...?
Inflation and unemployment
Four parts of GDP
CIGSNX
Consumption, Investment, Government Spending and Net Exports
Two options for contractionary fiscal policy
Decrease government spending and increase taxes
Three options for contractionary monetary policy?
SCuRRy
Sell Bonds, Raise Reserve Requirement, Raise Discount Rate
An appreciated currency leads to (increased/decreased) net exports and a current account (deficit/surplus).
Decreased
Deficit
Required Reserves are a percentage of what part of the T Chart?
Demand Deposits
In the Long Run the LRPC is vertical at...?
Equation for Consumer Price Index
(Current Year Price/Base Year Price) * 100
Deficits (raise/lower)interest rates and (app/dep) the dollar leading to (higher/lower) net exports.
Raise
Appreciate
Lower
Chain policy for expansionary monetary policy
Buy bonds, increase the money supply, decrease interest rates, increase investment, increase AD, increase PL and RGDP and decrease UN
If the dollar has depreciated against the euro and the FED wants to strengthen it, it should (buy/sell) dollars and (buy/sell) euros,
Buy dollars
Sell euros
Give the definitions for the Discount Rate, the Prime Rate and the Federal Funds Rate?
FED to Banks
Banks to Best customer
Bank to Bank
A negative supply shock will cause what to happen on the Phillips Curve and what change in inflation and unemployment?
Shift right
Increase inflation
Increase unemployment
Equation for inflation
(Current Year Price - Base Year Price)/Base Year Price * 100
Surpluses (raise/lower) interest rates and (app/dep) the dollar leading to (higher/lower) net exports.
Lower
Depreciate
Higher
Chain policy for Contractionary Monetary policy
Sell bonds, decrease the money supply, increase interest rates, decrease investment, decrease AD, decrease PL and RGDP and raise UN
If the dollar has appreciated against the euro and the FED wants to weaken it, it should (buy/sell) dollars and (buy/sell) euros.
Sell dollars
Buy euros
Where do banks borrow if they have negative excess reserves?
Other banks
Federal Reserve
An increase in government spending will cause what to happen on the Phillips Curve and what to happen to inflation and unemployment?
Increase up the Phillips Curve
Inflation rises
Unemployment falls
How do you change NGDP into RGDP?
Divide by the GDP Deflator
Explain crowding out of the net export effect?
Increase in GS leads to higher RIR which leads to lower investment.
Increase GS leads to higher RIR which appreciates the dollar and leads to lower net exports.
Monetary policy is more effective in stopping inflation or lifting the economy out a deep recession?
Stopping inflation
What are four determinants of currency?
Interest Rate
Inflation
Demand for Goods
Good economy
Bad economy
Risk
What two things can keep money creation from reaching its potential?
People holding money as cash
Banks holding excess reserves
A decrease in government spending will cause what to happen on the Phillips Curve and what to happen to inflation and unemployment?
Move down the Phillips Curve
Decrease inflation
Increase unemployment
Define inflation, disinflation and deflation.
Prices in the economy rise.
Prices in the economy rise at a decreasing rate
Prices in the economy fall