Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
20 Cards in this Set
- Front
- Back
1.What is the difference between the transactions demand and the asset demand for money? What is the precautionary demand for money?
|
P 308
Transaction demand- buying and selling stuff asset- kind of things you buy because you hope to make money down the road -saving for a rainy day. emergency fund |
|
2.When GDP changes, what impact will it have upon the total money demand curve?
|
P309
|
|
3.What is the equilibrium interest rate?
|
P310
the amoount you woould like to pay and lenders are willing to accept. |
|
4.What is the relationship between interest rates and bond prices?
|
P310
opposite directions |
|
5.Identify the major assets and liabilities of the Federal Reserve.
|
P311
Assets Securities Loans to commercial banks Liabilities Reserves of comercial banks Treasury deposits Federal reserve notes outstanding |
|
6.Identify the three major monetary tools of the Federal Reserve.
|
P
open market operations- buy and sell securites, The reserve ration The discount rate |
|
7.Describe how the Fed’s “open market operations” operates.
|
P
|
|
8.What happens to bank reserves when the Fed buys securities? When it sells securities?
|
P
Q1- Q2-cash goes to the fed- bank has less money and interest rates rise |
|
9.When the reserve ratio changes, what impact does it have on the banking system?
|
P
if the ratio drops they will have more money, if it rises less money is available. |
|
10.What is the discount rate? What impact does it have on the banking system when this rate is changed?
|
P315
-the interest rate that the federal reserve charges commercial banks for interest - |
|
11.What is the role of the “term auction facility”?
|
P316 G18
auction |
|
12.What is the federal funds rate? What impact does it have on the banking system when this rate is changed?
|
P
banks lending to other banks |
|
13.What is the prime interest rate?
|
P318
comercial banks lend to the most credit worthy customers. |
|
14.Describe the differences between expansionary and restrictive monetary policies.
|
P318-319
moetary=fed expansionary-(easy money) will lower the interest rate to bolster borrowing and spending. restrictive-(tight money)- increase the interest rate in order to reduce borrowing. |
|
15.Why do changes in interest rates affect investment spending more than consumer spending?
|
P321 (investment)
its more of risk if the interest rates are up and a worth while risk if they are low |
|
16.Compare the effects of expansionary and restrictive monetary policy on the economy.
|
P321-323 Table 16.3
|
|
17.Does monetary policy have any advantages over fiscal policy? If so, what are they?
|
P325
Speed, |
|
18.Are there any limitations to monetary policy? If so, what are they?
|
P328
Lags Cyclical Asymmetry |
|
19.What is “cyclical asymmetry”?
|
P329
lowering the rates does not make people spend money. |
|
20.What actions did the Federal Reserve take to deal with the mortgage default problem in 2007? What caused the crisis?
|
P
|