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16 Cards in this Set
- Front
- Back
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monetary policy
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consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy
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interest
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the price paid for the use of money
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transactions demand
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the demand for money as a medium of exchange
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asset demand
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the extent people want to hold their money as an asset
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total demand for money
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the sum of the transactions demand for money and the asset demand for money
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open-market operations
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consist of the buying of government bonds from, or the selling of government bonds to, commercial banks and the general public
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reserve ratio
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the fraction of checkable deposits that a bank must hold as reserves in the Federal Reserve Bank (or hold as vault cash) to meet the legal reserve requirement
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discount rate
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the interest rate charged on loans the Fed grants to commercial banks
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term auction facility
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the monetary policy procedure used by the Fed in which the commercial banks anonymously bid to obtain loans being made available by the Fed as a way to expand reserves int he banking system
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Federal funds rate
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the interest rate banks and other depository institutions change one another on overnight loans made out of their excess reserves
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expansionary monetary policy
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will lower the interest rate to bolster borrowing and spending, which will increase aggregate demand and expand real output
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prime interest rate
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the benchmark interest rate used by banks as a reference point for a wide range of interest rates charged on loans to businesses and individuals
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restrictive monetary policy
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will increase the interst rate in order to reduce borrowing and spending, which will curtail the expansion of aggregate demand and hold down price-level increases
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Taylor rule
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assumes that he Fed has a 2 percent "target rate of inflation" that it is willing to tolerate and that the FOMC follows three rules when setting its target for the Federal funds rate
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mortgage debt crisis
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the period beginning in late 2007 when thousands of homeowners defaulted on mortgage loans when they experienced a combination of higher mortgage interest rates and falling home prices
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cyclical asymmetry
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the ides that monetary policy may be more successful in slowing expansions and controlling inflation than in extracting the economy from severe recession
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