Monetary Policy I
Monetary Policy II
Economic Growth
FOREX
Hodge Podge
100
As the money supply increases, this decreases
What is the nominal interest rate?
100
What are the three functions of money?
Medium of exchange
Unit of account
Store of value
100
________ ________ ________ is when tax revenues are less than government purchases plus transfer payments in a given year.
Government budget deficit
100
This is the summary of the country's transactions with other countries.
What is the Balance of Payments
100
______ is the result of domestic Investment spending. ___________ is the money used to buy financial assets.
Capital
Financial capital
200
The ease with which an asset can be converted into a medium of exchange WITHOUT THE LOSS OF VALUE.
What is LIQUIDITY
200
By raising interest rates, the Fed causes these two categories of spending to decline
Investment spending
Interest rate-sensitive Consumption
200
According to the Quantity Theory of Money, an increase in the supply of money will lead only to the increase in _______ in the long run.
Price Level
200
When one currency is able to buy more of a foreign currency.
Appreciation
200
Most economists believe the best way to gauge a nation's well being is to use this metric
GDP Per capita
300
The money multiplier is equal to the reciprocal of this.
What is the reserve requirement?
300
Monetary base includes this component that is not part of the money supply (M1)
What is BANK RESERVES
300
A combination of expansionary fiscal policy and expansionary monetary policy can mitigate the effect of this phenomenon
What is CROWDING OUT
300
If Japan places tariffs on US imports, the dollar will _______ and the yen will _________.
Dollar DEPRECIATES
YEN APPRECIATES
300
What would cause point D to occur?
What would allow for consumption at E?
Unemployment/underused productive resources
Trade
400
Demand deposits are _________ on the bank balance sheets.
Liabilities
400
___________ is the interest rate that banks charge each other for overnight loans.
___________ is the interest rate the Fed charges banks for borrowing from it.
Federal Funds Rate
Discount Rate
400
How would you calculate economic growth rate from one year to another?
Economic Growth Rate = (GDP year 2 - GDP year 1) / (GDP year 1)
new-old/ old
400
What are the four shifters of demand and supply in the FOREX market?
A change in TASTES and PREFERENCES
change in domestic INCOME
change in domestic INFLATION or PRICE LEVEL
change in real INTEREST RATES
400
Assume a customer deposits $5,000; what is the maximum possible increase to the money supply if the bank lends out all of its excess reserves and the reserve requirement is 10%.
Answer = $45,000
$5,000 X 10 % = $500 reserves and excess reserves $4,500 (to loan out). MM=1/rrr =1/.10=10
Max expansion of MS = 0 + $4,500 X 10 = $45,000
500
?? = nGDP/ Money Supply
Indicates how much a unit of currency exchanges hands in a period of time.
Velocity of Money
500
The supply of loanable funds in an open economy consists of:
MUST USE PRECISE TERMINOLOGY!
Public savings
Private savings
Foreign financial capital inflows
500
These three improvements in the quality of productive resources will influence long-term economic growth
Technological advancements
Physical capital per worker
Human capital per worker
500
Daily Double- Expansionary monetary policy will cause this to happen to the balance of trade account balance? Why? Explain.
BOT account BALANCE will increase.
Expansionary monetary policy ➡️ ➡ NIR ⬇️ ➡ Foreign Financial Capital Inflows ⬇️ ➡ Demand for currency ⬇️ ➡ currency depreciates ➡ exports become relatively cheaper ➡ Net Exports ⬆️ ➡ Balance of Trade account balance ⬆️
500
An increase in inflationary expectations will result in this change in the Phillips Curve
Rightward shift of the SRPC