Chapter 24 Flashcards Preview

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Flashcards in Chapter 24 Deck (35)
1

Does the FRB control monetary or fiscal policy?

monetary

2

What elements are influenced when implementing fiscal policy?

taxes and expenditures

3

True or False: Government intervention is believed to assist in implementing monetary policy.


False. Fiscal (Keynesian) policy requires government intervention.

4

The FRB will ______ securities to increase the money supply and ease credit.

buy

5

The FRB will ______ securities to decrease the money supply and tighten credit.

sell

6

The FRB will ______ securities to decrease the money supply and tighten credit.

The FRB's Federal Open Market Committee that will trade government securities with primary government dealers

7

What is the transaction called when the FRB buys government securities and agrees to sell them back quickly?

A repurchase agreement (repo)

8

What is the transaction called when the FRB sells government securities and agrees to buy them back quickly?

a reverse repo

9

The __________ rate is the only rate directly controlled by the FRB.

discount rate

10

If a member bank needs to borrow funds from the FRB, what rate will it be charged?

discount rate

11

There would be an easing of the money supply if the discount rate is __________.

lowered

12

There would be a tightening of the money supply if the discount rate is __________.

raised

13


__________ requirements set the amount of funds that banks must hold in reserve against specified deposit liabilities.

Reserve requirements

14

What is the effect of lowering the minimum reserve requirement?

It increases the money supply and eases credit.

15

What is the effect of raising the minimum reserve requirement?

It decreases the money supply and tightens credit.

16

What is the least effective tool available to the FRB?

Margin requirements (Reg T)

17

The __________________ is the rate of interest banks charge each other on overnight loans.

fed funds rate

18

The __________________ is the rate of interest banks charge each other on overnight loans.

most volatile

19

In proper order, list the four phases of the business cycle.

1) Expansion - 2) Peak - 3) Recession / Contraction - 4) Trough

20

__________________________ is the measure of goods and services produced by the U.S. worldwide.

GNP - Gross National Product

21

_____________________ measures the goods & services produced within the U.S., disregarding the producer's origin.

GDP - Gross Domestic Product

22

A decline in GDP for two successive quarters is defined as a ____________.

recession

23

What economic theory emphasizes government intervention and the use of fiscal policy to manage the economy?

Keynesian Economic Theory

24

What economic theory emphasizes controlling the money supply to manage the economy?

Monetary Economic Theory

25

Stimulating the economy by reducing both taxes and the size of government is called _______________economic theory.

supply-side

26


________________ is a situation where clients withdraw funds from banks to seek higher yielding investments elsewhere.

Disntermediation

27

If interest rates are higher in the U.S. than overseas, what should happen to the value of the U.S. dollar?

It should strengthen as more foreign money is being invested in the U.S.

28

______________ is the rate that banks charge their most creditworthy corporate clients.

prime rate

29

What is LIBOR?

London Interbank Offered Rate (LIBOR)

30

____________ occurs when the supply of goods exceeds the demand for goods.

deflation

31

Deflationary periods are characterized by __________________ prices.

falling prices

32

___________ is what occurs when there is "too much money chasing too few goods."

inflation

33

True or False: Inflation is a persistent rise in the general level of prices.

True

34

Would inflationary periods be characterized by rising or falling interest rates?

rising

35

The _______________________ is often considered the most important measure of inflation.

Consumer Price Index (CPI)