FlashcardsChapter18

Question 1

Term

Answer 1

Description

Question 2

Monetary policy

Answer 2

the government’s adjustment of the money supply to influence the macroeconomy. (506)

Question 3

Expansionary monetary policy

Answer 3

a central bank’s action to increase the money supply in an effort to stimulate the economy. (506)

Question 4

Contractionary monetary policy

Answer 4

a central bank’s action to decrease the money supply. (506)

Question 5

Open market operations

Answer 5

operations involving the purchase or sale of assets by a central bank. (507)

Question 6

Quantitative easing

Answer 6

the targeted use of open market operations in which the central bank buys securities in specific markets. (509)

Question 7

Discount rate

Answer 7

the interest rate on the discount loans made by the Federal Reserve to commercial banks and other financial institutions. (510)

Question 8

Federal funds rate

Answer 8

the interest rate on loans between private banks. (511)

Question 9

Monetary neutrality

Answer 9

the idea that the money supply does not affect real economic variables. (520)

Question 10

Investment‐grade bonds

Answer 10

bonds that pay lower interest rates but are very likely to be repaid. (524)

Question 11

Junk bonds

Answer 11

bonds that pay higher interest rates but are considered speculative. (524)