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16 Cards in this Set

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  • Back
monetary policy
consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy
interest
the price paid for the use of money
transactions demand
the demand for money as a medium of exchange
asset demand
the extent people want to hold their money as an asset
total demand for money
the sum of the transactions demand for money and the asset demand for money
open-market operations
consist of the buying of government bonds from, or the selling of government bonds to, commercial banks and the general public
reserve ratio
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
discount rate
the interest rate charged on loans the Fed grants to commercial banks
term auction facility
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
Federal funds rate
the interest rate banks and other depository institutions change one another on overnight loans made out of their excess reserves
expansionary monetary policy
will lower the interest rate to bolster borrowing and spending, which will increase aggregate demand and expand real output
prime interest rate
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
restrictive monetary policy
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
Taylor rule
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
mortgage debt crisis
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
cyclical asymmetry
the ides that monetary policy may be more successful in slowing expansions and controlling inflation than in extracting the economy from severe recession