Chapter 15- Scetion 3 Flashcards Preview

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Flashcards in Chapter 15- Scetion 3 Deck (14):
0

What does the short run monetary policy affect?

Interest rates and availability of credit

1

What does the long run monetary policy affect?

Inflation and economic growth

2

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)

Down; up

3

The best or lowest interest rate commercial bankers charge their customers

Prime rate

4

When changes in supply of money affect the general level of prices

Quantity theory of money

5

Create enough extra money to offset deficit spending in order to keep interest rates from changing

Monetize the debt

6

Repeated short run attempts to keep rates low result in a long-term expansion of the money supply making what worse?

Inflation

7

The market rate of interest minus the rate of inflation

Real rate of interest

8

When the Fed conducts monetary policy what issues does it consider?

Timing and burden, present versus future allocation, and defining money

9

Interest rates and inflation affect the allocation of what?

Scarce resources between present and future users

10

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

11

M1 includes what?

Traveler's checks, coins, currency, demand deposits, and other checkable deposits such as NOW accounts and credit union share drafts

12

A measure of money that includes those components most closely conforming to money's role as a store value

M2

13

M2 includes what?

M1, small denomination time deposits, saving deposits, and money market funds