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20 Cards in this Set
- Front
- Back
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1.What is the difference between the transactions demand and the asset demand for money? What is the precautionary demand for money?
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P 308
Transaction demand- buying and selling stuff asset- kind of things you buy because you hope to make money down the road -saving for a rainy day. emergency fund |
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2.When GDP changes, what impact will it have upon the total money demand curve?
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P309
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3.What is the equilibrium interest rate?
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P310
the amoount you woould like to pay and lenders are willing to accept. |
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4.What is the relationship between interest rates and bond prices?
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P310
opposite directions |
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5.Identify the major assets and liabilities of the Federal Reserve.
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P311
Assets Securities Loans to commercial banks Liabilities Reserves of comercial banks Treasury deposits Federal reserve notes outstanding |
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6.Identify the three major monetary tools of the Federal Reserve.
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P
open market operations- buy and sell securites, The reserve ration The discount rate |
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7.Describe how the Fed’s “open market operations” operates.
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P
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8.What happens to bank reserves when the Fed buys securities? When it sells securities?
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P
Q1- Q2-cash goes to the fed- bank has less money and interest rates rise |
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9.When the reserve ratio changes, what impact does it have on the banking system?
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P
if the ratio drops they will have more money, if it rises less money is available. |
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10.What is the discount rate? What impact does it have on the banking system when this rate is changed?
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P315
-the interest rate that the federal reserve charges commercial banks for interest - |
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11.What is the role of the “term auction facility”?
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P316 G18
auction |
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12.What is the federal funds rate? What impact does it have on the banking system when this rate is changed?
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P
banks lending to other banks |
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13.What is the prime interest rate?
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P318
comercial banks lend to the most credit worthy customers. |
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14.Describe the differences between expansionary and restrictive monetary policies.
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P318-319
moetary=fed expansionary-(easy money) will lower the interest rate to bolster borrowing and spending. restrictive-(tight money)- increase the interest rate in order to reduce borrowing. |
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15.Why do changes in interest rates affect investment spending more than consumer spending?
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P321 (investment)
its more of risk if the interest rates are up and a worth while risk if they are low |
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16.Compare the effects of expansionary and restrictive monetary policy on the economy.
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P321-323 Table 16.3
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17.Does monetary policy have any advantages over fiscal policy? If so, what are they?
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P325
Speed, |
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18.Are there any limitations to monetary policy? If so, what are they?
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P328
Lags Cyclical Asymmetry |
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19.What is “cyclical asymmetry”?
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P329
lowering the rates does not make people spend money. |
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20.What actions did the Federal Reserve take to deal with the mortgage default problem in 2007? What caused the crisis?
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P
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