Money
The use of money and credit controls to influence macroeconomic activities.
What is monetary policy?
The direct exchange of one good for another, without the use of money
What is Barter?
Federal Reserve purchases and sales of government bonds for the purpose of altering bank reserves.
What is Open Market Operations?
The total quantity of output demanded at alternative price levels in a given time period, ceteris paribus.
What is aggregate demand?
Anything generally accepted as a medium of exchange.
What is money?
Banks that act as a central banker for the private banks in their regions across the country?
What are the Federal Reserve Banks?
The rate of interest charged by the Federal Reserve banks for lending reserves to private banks.
What is discount rate?
Use to stimulate aggregate demand by giving consumers and businesses more disposable income to spend.
What is a tax cut?
Serves the same function as cash.
What is checking account?
The minimum amount of reserves a bank is required to hold by government regulation is equal to the required reserve ratio times transaction deposits.
What are Required Reserves?
When the Fed wants to increase the money supply, it persuades people to deposit a larger share of their financial assets in banks and hold less in other forms.
What is Buying Bonds?
Policy used to shift the aggregate demand.
What is Monetary Policy?
A bank account that permits direct payment to a third party (e.g., with a check).
What is transactions account?
Bank reserves in excess of the required reserves.
What are excess reserves?
The process the Feds take to reduce the bank reserves.
What is Selling Bonds?
Type of policy used to cool an overheating economy with excessive demand.
What is Restrictive Policy?
Currency held by the public, plus balances in transaction accounts.
What is money supply (M1)?
The number of deposit (loan) dollars that the banking system can create from $1 of excess reserves; equal to 1 divided by the required reserve ratio.
What is money multiplier?
Could be used to purchase stocks, build up savings account balances and purchase bonds.
What are Idle Funds?
A key component in linking changes in the money supply and shifts in aggregate demand.
What are Interest Rate Targets?