Money!
The measures of money
M0
M1
M2
M3
The United States Central Bank's name.
The Federal Reserve
The vertical money supply curve Sm is controlled by what government body?
What is the Federal Reserve?
The difference between nominal and real interest rates is..
What is inflation?
Points inside the production possibilities frontier represent
Inefficiency or unemployment (or both)
Equation for the Money Multipier
1/rr rr=reserve requirement
Which of the following is true regarding the central bank's use of open market operations?
A-Decreasing the discount rate will increase the money supply.
B-Interest rates will decrease when the central bank buys bonds
C-Both
C- Both
Open Market Operations=
What is the buying and selling of government bonds to stimulate or slow down the economy?
Loaners are ____________ and borrowers are ____________ in the market for loanable funds.
What are suppliers... demanders of loanable funds.
The word stagflation describes a situation in which a higher price level occurs simultaneously with
lower employment (higher unemployment)
low production
All is true regarding money except
A-Medium of Exchange
B-Commodity money is used more than fiat money
C-The money system is more efficient than the barter system.
B-Commodity money is used more than fiat money
_____ x Money Multiplier = Impact of deposits on money supply
Excess reserves (net deposits)
List 2 of the 3 Tools of Monetary policy
1)Open Market Operations
2)Reserve Ratios
3)Discount Rates,
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?
Fiscal policy =
What is government spending and taxes?
When a financial transaction or trade is made using a currency. That currency is acting as a...
What is a medium of exchange?
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 $4,500 to loan out. 1/.10 = 10 deposit multiplier 4,500 X 10 = 45,000.)
If the FED increases the reserve requirement what happens to the money supply and interest rates?
Money supply decreases and interest rates increase.
An increase in savings will have what impact on the supply of loanable funds?
What is increasing the supply of loanable funds?
If the fed buys bonds on the open market, what will happen to the money supply?
What is they it will increase.
The reserve ratio is 10%, central bank sells $2mill in bonds to banks. If all excess reserves are loaned out, what will happen to the money supply?
It will decrease by 20 million.
1/.1 = 10
10* 2 million = 20 million
Our Central Bank("The Fed") is primarily responsible for this.
Monetary Policy
Money Supply
To fight a recession and close the recessionary gap the FED could increase the money supply. What effect would this have on AD and unemployment?
AD would INCREASE or shift right. Unemployment would DECREASE (because real output increases)
The two Shifters of Demand for Loanable Funds
1. Changes in perceived business opportunities
2. Changes in government borrowing
Name the shifters of Aggregate Demand
Any determinant of GDP
*C + I + G + Xn*