ECON 3120: Exam 2
23 Cards in this Set
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RGDP Leading
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when RGDP changes before the other variable
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RGDP Lagging
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when RGDP changes after the other variable
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Loanable Funds Market
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encompasses all of the banks, federal reserve system, and financial systems within an economy with the purpose of regulating savings, investment, and money
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any item that is
- regularly used as a medium of exchange
- a unit of account (must be able to measure debt)
-a method of tracking wealth (meaning that it can maintain value over time)
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Money
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M1
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includes cash, currency, coin, demand deposit accounts (checking), and traveler's checks
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M2
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includes less liquid sources like savings accounts and financials (bank money market accounts, CDs, 401ks, IRAs)
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M3
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includes financials over $100,000 and US deposits in foreign banks
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Open Market Operations
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the buying and selling of US government bonds in secondary markets (not who you directly buy bonds from)
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Money Multiplier
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shows how the same money is re-spent in society, thus raising money supply by more than the initial deposit
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Crowding Out
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occurs when borrowing by the government reduces the funds available for borrowing as investment
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Discount Rate
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interest rate that commercial banks can borrow from the federal reserve
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Federal Funds Rate
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the interest rate that banks are legally allowed to charge each other
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Quantitative Easing
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occurs when the Federal Reserve buys financial assets as a method to increase the money supply when the interest rate is already at or near 0 through bond market transactions
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Quantity Theory of Money
MV=PY
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attempts to show how effective changes of the money supply influence production and/or the inflation rate
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Value of Money (VL=1/P)
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the reciprocal of the price level in society
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Fischer Effect
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shows a one to one adjustment in the nominal interest rate when the inflation rate changes
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Money Neutrality
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the belief that changes in the money supply only affects nominal variables (prices, wages) and not real variables (real interest rate, RGDP)
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Board of Governors
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Set regulations, long and short-term objectives, and are the main conductors of monetary policy
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Federal Open Market Committee
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influence the interest rate through open market operations
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District Banks
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Their job is to provide the commercial banks with currency, enforce the banking regulations, and act as a lender of last resort (loan money out to banks)
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Loanable Funds Market key words
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-funds
-savings
-investment
-consumers
-firms spending
-new home mortgages
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Money Market key words
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Money Supply
-Fed Res, its parts and policies
-Commercial banks
-Depositors
Money Demand
-GDP components
-Population
-Government spending
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Value Model key words
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-prices
-price levels
-inflation, disinflation, deflation
-Money Supply
-Money Demand
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ECON 3120: Exam 2