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21 Cards in this Set
- Front
- Back
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M1
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currency + checking deposits
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M2
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M1 + savings deposits, money market deposit accounts, overnight repurchase agreements, Eurodollars, non institutional money market mutual funds, and small time deposits
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M3
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M2 + institutional money market mutual funds, large time deposits, and repurchase agreements and Eurodollars lasting more than 1 day
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MZM
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zero maturity money; components of the money supply that can be used immediately to conduct transactions; some may pay interest also
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Divisa Money
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money concept that weights various types of financial assets according to their degree of "moneyness" and sums them up to try to determine how much money people will act like they have when it comes time to spend
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excess Reserves
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the amount arrived at when required reserves are subtracted from a bank's actual reserves
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actual reserves
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the reserve amount computed by a bank by summing its holdings of vault cash with its holdings of reserve deposits at Federal Reserve banks over a 2-week reserve maintenance period
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required reserves
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financial institutions are required by law to maintain minimum reserves equal to a percentage of specified deposit liabilities. Reserve requirements vary with the deposit size of the institution and the type of deposit. They are held at Federal reserve banks or as cash in financial institutions' vaults
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fed funds rate
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the rate at which banks and other depository institutions lend excess reserves or other immediately available cash deposits to each other overnight; the rate is determined by negotiation between the private borrowers and lenders of the reserve
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monetary theory
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theory that when the supply of money is greater than the amount of money people demand, people will spend faster and level of economic activity in teh economy (GDP) will rise. Conversely, if the money supply isl ow relative to the amount of money demanded, people will spend less in order to accumulate ore money and the level of economic activity (GDP) will decline. theses effects result from imbalances between the quantity of money supplied to the economy and quantity of money demanded
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Keynesian theory
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believes that the velocity of money is unstable and unpredictable, so it is hard to use monetary policy to control the economy directly. Monetary policy mainly affects the economy by changing interest rates, which in turn affect the willingness of both consumers and investors to buy goods
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liquidity trap
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in keynesian theory, an occurrence during major depressions when people already have so much money relative to their needs that any extra money is hoarded and will no longer drive down interest rates
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Humphrey Hawkins act
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passed in 1978, this legislation specifies the primary objectives of monetary policy- full employment, stable prices, and moderate long-term interest rates. In addition, it requires that the board of governors of the federal reserve system submit a report on the economy and the conduct of monetary policy to congress by feb. 20 and july 20 of each year
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full employment
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every person of working age who wishes to work can find employment
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frictional unemployment
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indication that a portion of those that are unemployed are in transition between jobs
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Structural unemployment
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a portion of those that are unemployed are unemployed because there is a mismatch between their skill levels and available jobs or that there are jobs in one region of the country but few in another region
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natural rate of unemployment
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level of unemployment that policy makers are willing to tolerate- a sort of "full employment unemployment rate"
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price stability
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the stability of the average price of all goods and services in the ecnomy
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inflation
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the continuous rise in the average price level
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technical factors
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factors outside the control of the federal reserve that affect the monetary base
ex. cash drains, float, tresury deposits |
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velocity
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measure of the number of dollars of national income that are supported with each dollar of money in circulation. when velocity rises, more income can be generated with the same amount of money in circulation. the converse holds if velocity decliines
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