Chapter 13. Demand side policies

Question 1

Monetary Policy

Answer 1

Changes in the supply of money or interest rate

Done by the central bank

Question 2

What is a Central Bank?

Answer 2

Banker for the Government

Question 3

What is a Central Bank?

Answer 3

Carry out Monetary policies.

Question 4

What is a Central Bank?

Answer 4

Banker for the commercial Banks

Question 5

What is a Central Bank?

Answer 5

Regulate the financial sector

Question 6

Must know

Answer 6

• There central bank is Not a Commercial bank.
• Consumers don’t use Central bank
  eg banks like. Wells Fargo, Capitec, bank of America

Question 7

The main tool: they control the Supply $

Answer 7

Open market operation( buying and selling government bonds)

Question 8

The main tool: they control the Supply $

Answer 8

Changing the reserve requirement for Banks.

Question 9

The main tool: they control the Supply $

Answer 9

Changing interest rates to commercial banks

sometimes called discount/base rate

Question 10

The main tool: they control the Supply $

Answer 10

Quantitative easing( which means central bank purchases long term security in open market.

Question 11

Other tools: the interest rate

Answer 11

The central bank identifies a target interest rate ( Feds Funds rate)
- this the rate in which chimerical banks lend to one another.

Question 12

Monetary and AD

Answer 12

Increase supply of money( decreased interst rate)
C - > ( increases) 
I - > ( increases)
X - > ( increases) 
M - > ( increases)