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27 Cards in this Set

  • Front
  • Back


money that can be directly used for transactions


broad money includes trans money and near monies--close subs for trans money, such as savings account and money market account.

assets - liabilities = net worth

control money supply

1. changing in the required reserve

2. changing the discount rate

3. engaging in open market operations

Expansionary Monetary policy (easy monetary policy)

easy expanding monetary plicy

Contractionary monetary policy(tight monetary policy)


The fee that borrowers pay to lenders for use of their funds

Interest rate goes up Bonds worth goes down

Transactive motive

the main reason that people hold money to buy things

non-synchronization of income and spending

the mismatch between the timing of money inflow to the household and the timing of money outflow for household expenses

speculation money

one reason for holding bonds instead of money. buying bonds with high-interest rate hoping interest rates will go down.

labor up-unemployment down-employment up-income up-spending up-transactions up- m1 up

qmd= f (interest rates, p, y)

msupplied>mdemand excess supply of money

mdemand>msupplied excess demand of money

Aggregate supply

The total supply of all goods and services in an economy


Are a large fraction of total costs and wage changes lag behind prices changes

Cost shock

a change in costs that shifts the short-run as curve

AS ----> agg. q supplied vs agg price

AD ----> agg . q demand vs agg price

IS ----> agg . output y vs Interest Rate R

IS curve

relationship between agg output and the interest rate in the goods market

FED rule

Equation that shows how the feds interest rate decision depends on the state of the economy

r= AY+bp+Y


AGG price=P

Other Factors= Consumer confidence, domestic banks est, problems abroad

Real Wealth effect

The consumption brought about by a change in real wealth that results from a change in the price level

Trade surplus

country that exports more than it imports

Trade Deficit

Import more than you are exporting

Terms of Trade

The ratio at which a country can trade domestic goods for imported goods


the ratio at which two currencies are traded. The price of one currency in terms of another

Foreign exchange

All currencies other than the domestic currency

Balance on current account

net exports of goods plus net exports of services plus net investment plus net transfer payments

balance on capital account

In the united states the sum of the following: change in private us assets abroad, the change in private foreign assets in the us, change in us gov assets abroad, and the change in foreign gov assets in the us.