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26 Cards in this Set

  • Front
  • Back
barter
exchange of goods, services, or assets, without the use of money
deflation
when the aggregate price level falls
liquidity
the ease of use of an asset as a medium of exchange
commodity money
a good used as money that is also valuable in itself
fiat money
a medium o exchange used as money because a government says it has value and people accepts it
MI
a measurement of the money supply equal to currency, checkable deposits, and traveler's checks
financial intermediary
an institution such as a bank, savings, and loan association, or life insurance company that accepts funds from savers and make loans to borrow
bank reserves
funds not loaned out by private bank, but kept as vault cash or on deposit at the Fed. Reserve
required reserves
reserves that banks are required to hold by the Fed
open market operations
sales or purchases of government bonds by the Fed
monetary base (high-powered money)
currency plus bank reserves
money multiplier
the ratio of the money supply to the monetary base, it tells how much money supply will change for a given change in high-powered money
discount rate
the interest rate t which banks can borrow reserves from the Fed discount window
federal funds rate
the interest rate determined in the private market for overnight loans of reserves among banks
prime bank rate
the interest rate that banks charge their most trusted commercial borrowers
accelerator principle
the idea that high GDP growth leads to high investment growth
expansionary monetary policy
the use of monetary policy took to increase the money supply, lower interest rates, and stimulate a higher level of economic activity
accommodating monetary policy
loose or expansionary monetary policy intended to counteract recessionary tendencies in the economy
contradictionary monetary policy
the use of monetary policy tools to limit the money supply, raise interest rates, and encourage a leveling-off or reduction in economic activity
quantity equation
M x V=P x Y where M is the money supply, V is the velocity of money, P is the price level and Y is the real output
velocity of money
the number of times a dollar would have to change hands during a year to support nominal GDP, calculated as V = (PxY)/M
quantity theory of money
the theory that money supply is directly related to nominal GDP, according to the equation M x V= P x Y
monetary neutrality
the idea that changes in the money supply may affect only prices, while leaving output unchanged
money supply rule
committing to letting the money supply grow at a fixed percentage rate per year
monetarism
a theory associated with Milton Friedman, which claims that macroeconomic objectives are best met by having the money supply grow at a steady rate
monetizing the deficit
when a central bank buys government debt as it is issued