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12 Cards in this Set
- Front
- Back
Monetary policy
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A central bank's changing of the money supply to influence interest rates and assist the economy in achieving price stability, full employment, and economic growth.
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Interest
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The payment made for the use of money (of borrowed funds)
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Transactions demand
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The amount of money people want to hold for use as a medium of exchange (to make payments); varies directly with the nominal GDP
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Asset demand
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The amount of money people want to hold as a store of value; this amount varies inversely with the interest rate
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Open-market operations
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The buying and selling of U.S. government securities by the Federal Reserve Banks for purposes of carrying out monetary policy.
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reserve ratio
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Required reserves / Checkable-deposit liabilities
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discount rate
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Rate of interest bank pays FED when it borrows money from the FED
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Federal Funds rate
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The interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves
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Expansionary monetary policy
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Federal Reserve system actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy
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Restrictive monetary policy
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Federal Reserve system actions to reduce the money supply,increase interest rates, and reduce inflation, a tight money policy
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Taylor rule
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Modern monetary rule that would stipulate exactly how much the Federal Reserve should change interest rates in response to divergences of real GDP from potential GDP and divergences of actual rates of inflation from a target rate of inflation.
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Cyclical asymmetry
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The idea that monetary policy may be ore successful in slowing expansions and controlling inflation than in extracting the economy from severe recession.
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