Econ Test

Front 1

Monetary policy: list the major discretionary tools

Back 1

1. Federal reserve requirment

2. Discount rate/Federal funds rate

3. Federal open market operations

Front 2

How do the major monetary discretionary tools work to expand/contract money supply

Back 2

Increase reserve requirement - decrease money supply

Decrease reserve requirement - increase money supply

Increase discount rate (cursive r) - decrease money supply

Decrease discount rate (cursive r) - increase money supply

Front 3

How do the buying/selling of government securities by the federal reserve affect money supply

Back 3

Increase money supply by buying bonds

Decrease money supply by selling bonds

Front 4

Monetary policy: list 2 minor qualitative tools

Back 4

1. Moral suasion

2. Margin requirments on stock Market transactions

Front 5

Tools of fiscal policy: list 3 built in (auto/legeslation has already passed) stabilizers & how they expand/contract the money supply (GDP)

Back 5

1. Farm aid

i. Income falls payments made automatically

i. Price supports price wheat goes down subsidies i

2. Unemployment compensation

i. High unemployment low GDP compensation payments are made (increases the C component of total spending)

d. Unemployment taxes increase when employment high

3. Progressive graduated tax structure (automatic changes in tax receipts)

i. Income i, i in tax receipts

d. Income d, d in taxes

Front 6

Tools of fiscal policy: list 3 built in discretionary (need legeslative action/new legislation) stabilizers

Back 6

1. Varying public works and other expenditure programs

i. Expand public works (increase G component)

d. Stop public works (especially in an inflationary situation)

2. Varying welfare or other expenditure programs

i. Veterans bonuses, parody payments to farmers, amnt/duration of unemploment comp

3. Government can change the tax rate structure

National sales tax, change tax rate, change whole structure

Front 7

What is the most important regulation tool?

Back 7

Federal open market regulation

Front 8

List the functions of money

Back 8

1. Medium of exchange

2. Convenience

3. Uniformity

4. Accuracy & divisibility

5. Durability

Front 9

List the components of money (OCD's)

Back 9

Coins, currency, demand deposits

Front 10

2 major components of near money

Back 10

U.S. government security

Time and savings accounts

Front 11

Explain concept of near money

Back 11

Near money is less liquid (Porsche example)

Front 12

5 ways that monetary policy works to expand GDP

Back 12

1. i reserves available to member banks

a. i reserve requirements

b. d discount/Federal fund rate

c. Buy bonds

2. Expansion of deposit based on the ability of the banks to loan

3. i money supply; decrease cursive i

4. d cursive i, investment i, government i

5. i I&G - i GDP

Front 13

How much money can be created based on reserve requirement

Back 13

Front 14

4 requisites that are necessary for money to expand

Back 14

1. Banks must have new reserves

2. Banks must loan money

3. Individuals must borrow money

4. Individuals must be willing to leave money on account

Front 15

Define

1. Inflation

2. Deflation

Back 15

1. Rise in general price level

2. General price level falls

Front 16

Who are adversely/beneficially affected by inflation

Back 16

Benefit: profit receivers, debtors

Adverse: fixed income reciepients, creditors

Front 17

Quantity theory of money (equasion of exchange)

Back 17

MV=PQ

(Money supply)(income velocity of circulation)=(General price level)(quantity of goods)

How many times it changes hands over a year=GDP

Front 18

2 forms of legal reserve that banks accept

Back 18

Vault cash

Banks accounts with Federal reserve

Front 19

Describe the effects of excess reserves on the relative success of monetary policy aimed to contract the money supply

Back 19

If monetary policy is going to be effective then the Federal reserve must be able to control the banks excess reserves (bonds and loans)

Front 20

Business cycles: external (exogenous)

Back 20

External effects from outside the system

ex: wars, climate change, sunspots, scientific discoveries

Front 21

Business cycles: internal (endogenous)

Back 21

Internal affects from within

ex: over investment, psychological self generation