Fin 4319-Record A3 Flashcards Preview

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Flashcards in Fin 4319-Record A3 Deck (25):
1

What does rising inflation cause?

High employment

2

What does low inflation cause?

Low employment

3

What is stagflation?

In 1970's rising unemployment, rising rate of inflation

4

What are the goals of the Federal Reserve bank?

1. Full employment
2. Low inflation

5

What happened in the late 1990's?

high full employment, and low rate of inflation.

6

What is keynesian economics?

Subsequently, the term “Keynesian economics” was used to refer to the concept that optimal economic performance could be achieved – and economic slumps prevented – by influencing aggregate demand through activist stabilization and economic intervention policies by the government.

7

Who are they talking about when they 'the fed'

Federal Reserver also known as Central Bank

8

What is the velocity of money?

How many times money is exchanged during the year

9

what are the tools of fed?

1. change the discount rate
2. reserve requirement
3. open market operations

10

according to monetarist how is inflation created?

the growth of money supply

11

what is milton friedman view?

he's a monetarist

12

what is the long run neutrality of money

in the long run can not influence economic activity

13

how does short run "illusion of money"

friedman effect, it seems like you have a lot more money in short run, but long run we just have inflation

14

how long does the illusion of money last?

2-3 years

15

what are monetary dove?

easy money, want everyone working and don't care about inflation

16

what is a monetary hawk?

low inflation, price stability, don't care if people are out of work

17

what are rational expectations?

they see what fed is doing in short and long run, nominal interest rates would jump, inflation would increase -> superneutrality of money.. Fed would have no power

18

who is the paul volcker

federal reserve chairman in 80's who lowered inflation but stopping the money supply

19

what is spot rate of interest?

it's the current rate of interest (right now.. this minute)

20

what is supraneutrality

if fed increase money supply, the

21

how do you find inflation expectations?

look spread between treasuries and tips (treasury inflation protected security)

22

what is the fisher model?

market's expectation is based on past inflation rates

forecast inflation on a model on past and put more weight on recent quarters, so if inflation has been low and people expect it to continue to be low

if inflation is low and is picking up, it

naive approach, in real world bring in other considerations.

23

what does economic theory say about inflation

inflation is when economy is growing too fast, (overheated), growing to slow is deflation. Look at past utilization and

24

what is capacity utilization

to what extent the factories operating at full out put.

25

what determines inflation expectations?

fisher model