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28 Cards in this Set
- Front
- Back
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M2 |
Currency Saving accounts Travelers checks Demand deposits |
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Fed can increase money supply #1 |
Fed buys gov securities in the open market |
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Fed increase money supply #2 |
Can lower the discount rate |
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Fed increase the money supply #3 |
Fed can change required reserve rate |
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Barriers of trade |
Tariffs Import quotas Standards |
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Monetary policy differences with fiscal |
Ran by fed and changes money supply and interest rates |
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Fiscal policy differences with monetary |
Ran by government and can change tax rates and levels of spending to influence AD |
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During a recessionary gap with monetary policy the Fed will do what? |
Increase the money supply Interest will decrease Means cheaper to borrow and firms and households will borrow more Households=> C increases Firms => I increases AD shifts right |
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Monetary policy in inflation gap |
Fed will decrease money supply Interest rates increase More expensive to borrow less firms and households borrow Means less buying Investments and consumption expenditures go down AD shifts left |
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Federal funds market money supply increase interest rates decrease |
Fed increases money supply buys more bonds
When fed buys more bonds reserve balances increases
With increase in reserves more banks will make more loans in fed fund market
Shift supply curve in fed fund to right fed fund rate decrease and interest rates throughout economy decreases |
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Bond market money supply increase and interest rates decrease |
To Increase money supply fed buys more bonds in open market demand
Demand curve for bonds shift right price bonds increase
We know from pv formula when the price of bonds increases yields decreases because price of bonds pv of the stream of income |
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Current target fed fund rate |
.37 newyorkfed.org |
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Current target fed fund rate |
.37 newyorkfed.org |
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Current federal fund rate |
.50 bankrate.com |
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Current target fed fund rate |
.37 newyorkfed.org |
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Current federal fund rate |
.50 bankrate.com |
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Discount rate |
1% bankrate.com |
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Current target fed fund rate |
.37 newyorkfed.org |
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Current federal fund rate |
.50 bankrate.com |
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Discount rate |
1% bankrate.com |
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Current prim rate |
3.50 % bankrate.com |
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3 uses of money |
Medium of exchange Example exchange $1 for a candy bar
Store of wealth Example I deposit $100 in my saving account
Unit of account Example prices of Taco Bell are quoted in dollars |
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Federal fund rate money supply increases interest rates decrease affects supply or demand |
Supply to the right |
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Federal fund rate money supply increases interest rates decrease affects supply or demand |
Supply to the right |
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Bond market increase in money supply interest rates decrease affects supply or demand |
Demand to right |
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When banks lend to other banks |
Federal fund rate |
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When banks lend to other banks |
Federal fund rate |
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Fed lends to banks |
Discount rate |
