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62 Cards in this Set

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What are the major 2 components of the M1 Money Supply?
Currency & Checkable Deposits
What percentage of the US money supply consists of coins?
2 to 3 %
What percentage of the US money supply consists of Federal Reserve Notes?
50%
What is token money?
Lower intrinsic value than the paper money or coinage that make up the currency.
What are the 2 major components of Checkable Deposits?
Checks can be issued as tender; Transfer ownership of deposits
What institutions offer checkable deposits?
Commercial Banks; Thrifts
What services do thrifts offer?
Savings & Loan; Mutual Savings; Credit Unions
What are the 3 functions of the money supply
Medium of exchange
Unit of account
Store of value
What 4 major components make up M2 supply?
MMMF; MMDA; Small Time Deposits; & M1
What does MMMF stand for?
Money Market Mutual Funds
What does MMDA stand for?
Money Market Deposit Accounts
What does a MMMF consist of?
Combined funds of many shareholders to buy interest bearing, short term credit instruments.
What are the 2 examples of a MMMF?
CD's or US Government Securities
What is a MMDA?
An interest bearing account; with a miminum balance account.
What is a feature of the MMDA?
Can easily withdraw funs or transfer funds to a checkable account.
A Small Time Deposit can be no greater than?
$100,000
Does a small time deposit earn interest?
Yes, more interest than a MMDA.
But there are account requirements for Small Time Deposits. What are they?
Time Deposit - Held for a period of time; Withdrawel limitation.
Can a Small time deposit be cashed early?
Yes, but with a penalty
What are the 3 "M's" of the money supply? Order from largest to smallest...
M3, M2, M1
What are deposits greater than $100,000?
Large time deposits
Generally, who owns Large Time Deposits?
Businesses
What M2 item has an interest bearing account, with a minimum balance requirement?
MMDA
What deposit earns more interest than a MMDA, but must be held for a period of time?
Small time deposits
What is Dt?
Transactions Demand
Who 2 groups make up Dt?
Household and Businesses
Why is Nominal GDP considered?
Households & firms want more money if prices rise or if real input increased
How does Dt increase?
Larger dollar volume needed to have desired transactions
What is Da?
Asset Demand
What are the financial assets of Da?
Corporate stocks
Private/Gvnt Bonds
Money
How does Da relate to interest?
Varies INVERSELY with interest
What is a low opportunity cost?
Cheap to hold, people hold more
What is a high opportunity cost?
Expensive to hold money, people hold less
What is Dm?
Demand for money
When nominal GDP increases, what do interest rates do?
Interest rates increase
What must the FED do if the economy expands without creating more money?
Increase interest rates
Write down the formula for Dm.
Dm = Dt + Da
What do we use the Dm to find?
Equilibrium interest rate
When nominal GDP falls, what do interest rates do?
Interest rates decrease
What must the FED do if the economy expands without raising interest?
Create more money
How do you calculate the Dm Slope?
You add the units of Dt and Da
How do you get Sm?
Sm = unit position of Da
How do you get the equilibrium?
You create a verticle line Sm and intersect it with Dm
FOMC?
Federal Open Market Committee
How many committee members?
12
How many on the board of governors?
7
How many presidents in the NY Federal Reserve bank?
1
How many remaining presidents and duration?
4, on a 1 year rotating basis
What policy does the governors aid in?
Monetary policy
What does the FOMC meet regularly to do?
Purchase or sale of government securities, bills, notes, bonds
How many reserve banks throughout the US?
12
What 4 sections make up the Fed structure?
Board of Governors
12 Reserve banks
Commercial Banks
Public and Households
What state is the Fed head quatered?
NY
Who elects the FOMC?
U.S. President & Senate
What are the terms of the 7 board members?
14 years staggered, so that 1 member is replaced every 2 yrs.
What are the terms of the Chairpersons & VP Chairpserons
4 years
What are the 5 Fed functions?
1.Issuing Currency
2.Acting as a fiscal agent
3.Supervise Banks
4.Setting reserve requirements
5.Provide for check collection
When the FED is acting as a fiscal agent; who does it provice finacial services to?
U.S. Government
What 3 services do they provide the US?
1.Collecting large sums of money through taxation.
2. Gvnt Spending
3. Sell & redeem bonds
When the FED is Supervising the banks, what 2 services do they provide?
1. Provide examinations to assess bank compliance to regulation.
2. Uncover questionable practices and Fraud
When the FED provides check collection, what do they do?
Adjust the reserves; As deposits are transfered, the Fed tracks and re-distributes funds.
When the FED is Setting Reserve Requirements, and holding reserves, what 2 things do they do?
1.Accept deposits from banks and thrifts
2.Charge interest called the discount rate.