Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

22 Cards in this Set

  • Front
  • Back
The 3 Functions of Money
1)A Medium of Exchange
2) A Unit of Account
3) Store of Value
Money Defintion M1
Currency and all checkable deposits.
Checkable deposits
Debts of commercial banks and savings institutions
token money
The intrinsic value is worth less worth less than the value of the token.
Federal Reserve Notes
All paper currency is in this form.
thrift institutions (thrifts)
Savings and loan associations and mutual savings banks.
Money Definition M2
M1 + Near Monies:
- Savings deposits
- Money Market Deposits
- Small time ($100,000) time deposits, like CDs.
- Money Market Mutual Funds
Money Definition M3
M2 + Large ($100,000) time or more deposits.
Equation to find the value of a dollar.
D = 1/P
D = Dollar
P = Price Level
transactions demand
The demand for money based on need for labor, materials, power and other resource inputs.
Asset Demand
The amount of money people want based on money's store of value. It varies with interest rates.
Total Demand for Money
Transaction demand + Asset Demand
Money Market
The combination of the supply of money and the demand of money which allows us to determine the equilibrium rate of interest.
Federal Reserve System (the Fed)
The monetary authority in the United States which is controlled by the Board of Governors.
Federal Open Market Committee (FOMC)
It aids the Board of Governors in conducting monetary policy. It consists of 12 individuals, 7 of which are members of the Board of Governors, 1 who is the president of the New York Reserve Banks, and the other 4 remaining presidents of Federal Reserve Banks whom rotate every year. They are concerned with bonds, notes, and bills (govt. securities) in the open market which directly impact interest rates nationally.
What is Fiscal Policy?
Demand Management Keynesian Style
Who determines fiscal policy?
The President and Congress.
What are the goals of fiscal policy?
Full Employment (GDPe) and Stable Prices
What are the tools used by fiscal policy makers?
Adjusting Taxes and Government Spending.
What is the standard fiscal policy in a recession?
To create economic stimulus by increasing Government spending or by decreasing Taxes.
What is the standard fiscal policy when there is high inflation and the economy is "overheating"?
To contract the economy by reducing Government spending or increases Taxes.
Why might full employment fiscal policy fail to shorten a recession?
1) Timing
2) Political Business Cycle
3)Ricardo-Barro Effect
4) Crowding Out