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26 Cards in this Set
- Front
- Back
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Monetary policy is conducted by a country’s ___.
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central bank
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The U.S. central bank is the ___ ___ and the Australian central bank is the ___ ___ of ___.
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Federal Reserve; Reserve Bank of Australia
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___ consists of...
1) currency 2) traveler's checks 3) demand deposits 4) OCDs, NOWs and ATS accounts |
M1
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___ consists of...
1) savings deposits 2) small CDs 3) money market mutual funds |
M2
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___ consists of...
1) CDs over $100,000 2) repurchase agreements |
M3
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The money supply equals ___ in the hands of the public plus ___ ___.
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currency; demand deposits
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A system in which banks hold a fraction of their deposits as reserves. Banks create money.
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fractional-reserve banking
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Controlled by the central bank
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monetary base
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the amount banks must keep on reserve according to the Fed
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required rr
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The reserve-deposit ratio, rr, depends on ___ and ___ policies.
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regulations; bank
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The increase in the money supply resulting from a one-dollar increase in the monetary base.
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money multiplier
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The interest rate banks charge each other for loans.
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federal funds rate
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Non-monetary assets having some of the liquidity of money.
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near money
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The resources a bank’s owners have put into the bank.
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bank capital
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The use of borrowed money to supplement existing funds for purposes of investment.
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leverage
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The number of times the average dollar bill changes hands in a given time period.
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velocity
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MV = PY
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income velocity of money
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MV = PT
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transactions velocity of money
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M/P represents...
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real money balances, the purchasing power of money
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This theory predicts a one-for-one relation between changes in the money growth rate and changes in the inflation rate.
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Quantity Theory
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The Fisher equation, : i = r + pie, implies a one-for-one relationship between changes in ___ rate and changes in ___ ___ rate.
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inflation; nominal interest
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In the long run, the ___ ___ is determined by labor supply and the MPL (not price level or inflation rate like in short run).
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real wage
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arbitrary redistributions of wealth are ___ inflation.
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unexpected
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Real variables are measured in ___ units, while nominal variables are measured in ___ units.
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physical; monetary
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The theoretical separation of real and nominal variables in the classical model, which implies nominal variables do not affect real variables.
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classical dichotomy
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Changes in the money supply do not affect real variables. In the real world, money is approximately neutral in the long run.
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neutrality of money
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