Flashcards in Chapter 15- Scetion 3 Deck (14):
What does the short run monetary policy affect?
Interest rates and availability of credit
What does the long run monetary policy affect?
Inflation and economic growth
When the Fed expands the money supply, the cost of credit goes (up/down). When the Fed contracts the money supply, the cost of credit goes (up/down)
The best or lowest interest rate commercial bankers charge their customers
When changes in supply of money affect the general level of prices
Quantity theory of money
Create enough extra money to offset deficit spending in order to keep interest rates from changing
Monetize the debt
Repeated short run attempts to keep rates low result in a long-term expansion of the money supply making what worse?
The market rate of interest minus the rate of inflation
Real rate of interest
When the Fed conducts monetary policy what issues does it consider?
Timing and burden, present versus future allocation, and defining money
Interest rates and inflation affect the allocation of what?
Scarce resources between present and future users
Represents the transactional component of the money supply, or the components of the money supply that most closely match money's role as a medium of exchange
M1 includes what?
Traveler's checks, coins, currency, demand deposits, and other checkable deposits such as NOW accounts and credit union share drafts
A measure of money that includes those components most closely conforming to money's role as a store value