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