Financial Assets
giving up the chance to earn money through interest (by holding cash)
What is opportunity cost (of holding cash)
Reserves, Excess Reserves, and Loans are on this side of the bank balance sheet
What are assets.
the Y axis in the money market
What is the nominal interest rate
What is expansionary monetary policy?
a hypothetical market for the money that is able to be borrowed including the market for bonds, stocks, and personal loans
What is the Loanable Funds Market
The measure of how fast an asset can be turned into cash
What is liquidity?
Demand Deposits are on this side of the bank balance sheet
What are liabilities (on a bank balance sheet)
Currency in circulation, demand deposits, and other liquid deposits.
What is M1
What is contractionary monetary policy?
Real interest rate (on a graph).
What is the Y-axis on the loanable funds market graph.
Crypto, real-estate, gold/silver, and art are this kind of asset.
What is an illiquid/not liquid asset.
Demand Deposits / Reserves =
*when there are no excess reserves
What is the reserve requirement (rate)
A change in the aggregate price level, GDP, or the ability and costs of using money substitutes (like credit cards) cause this.
A change in the money demand.
The two reasons it takes a while for the economy to respond to monetary policy changes
What are recognition lag an impact lag?
The effect when the government is running a deficit and drives up interest rates. This leads to reduced investment spending.
What is Crowding Out?
The entity who sees a car loan as an asset
Who is the bank/lender
This number dictates the expansion/contraction of the money supply based on a deposit/withdrawal.
What is the money multiplier
An increase in credit card fees can cause MD to increase resulting in this effect.
The expansionary monetary policy in a limited reserve framework as a result of less money required to be in reserves.
What is the impact of a reduction in reserve rate?
The macroeconomic event that causes a leftward shift of the money demand curve.
What is a recession.
The relationship between interest rates and bond values
What is an inverse relationship
The impact on the money supply of a withdrawal of 2500$ from a banks reserves with 10000$ that keeps no excess reserves, where the required reserve ratio is 50%.
$5000
How will a change in the Demand for money due to a decrease in GDP affect the AD curve?
(this does not answer in a question--there's no better way to format this one)
Demand will decrease, causing NIR to decrease. NIR decreasing boosts interest based spending which increases the Consumption portion of the AD curve which shifts AD to the right (increase)
The Expansionary monetary policy that occurs in an ample reserves system.
What is a decrease in administered interest rates/ policy rate?
The rightward shift of the supply curve when there is more money entering the market to work with
What is the effect of positive inflow (net capital inflow on the loanable funds market)?