Macroeconomics Mcconnell Brue 17 Chapter 14

Front 1

Monetary policy

Back 1

A central bank's changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment, and economic growth.

Front 2

Interest

Back 2

The payment made for the use of money (of borrowed funds)

Front 3

Transactions demand

Back 3

The amount of money people want to hold for use as a medium of exchange (to make payments); varies directly with the nominal GDP

Front 4

Asset demand

Back 4

The amount of money people want to hold as a store of value; this amount varies inversely with the interest rate

Front 5

Open-market operations

Back 5

The buying and selling of U.S. government securities by the Federal Reserve Banks for purposes of carrying out monetary policy.

Front 6

reserve ratio

Back 6

Required reserves / Checkable-deposit liabilities

Front 7

discount rate

Back 7

Rate of interest bank pays FED when it borrows money from the FED

Front 8

Federal Funds rate

Back 8

The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves

Front 9

Expansionary monetary policy

Back 9

Federal Reserve system actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy

Front 10

Restrictive monetary policy

Back 10

Federal Reserve system actions to reduce the money supply,increase interest rates, and reduce inflation, a tight money policy

Front 11

Taylor rule

Back 11

Modern monetary rule that would stipulate exactly how much the Federal Reserve should change interest rates in response to divergences of real GDP from potential GDP and divergences of actual rates of inflation from a target rate of inflation.

Front 12

Cyclical asymmetry

Back 12

The idea that monetary policy may be ore successful in slowing expansions and controlling inflation than in extracting the economy from severe recession.