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