economics connect

the six month certificate of deposit (CD) you bought in June that will mature in time to pay your December rent:

M2

examples of M2 assets would be

a savings account; certificates of deposits

______________ demand describes the overall, or total, demand for all final goods and services produced in an economy.

aggregate

banks can expand reserves, and make more loans by:

borrowing from the federal reserve; attracting deposits and encouraging saving

generally, the federal reserve uses three tools to carry out policy:

changes in the reserve requirements; open market operations; changes in discount rate.

actions taken by a country's central bank to contract the money supply and raise interest rates with the objective of decreasing real GDP and controlling inflation is _________ monetary policy

contractionary

if miguel deposits $200 cash into his money market mutual fund, M1 _________ and M2

decreases by $200; remains the same

the federal reserve district banks are:

divided into geographical regions with the majority of the district banks located in the eastern half of the united states.

_____________ reserves, the amount the bank can lend out to earn interest, equal _______ reserves minus _____ reserve

excess; total; required

the entity that oversees research into domestic and international financial conditions and investigates the health of the economy, the effect of banking laws and other issues that consumers and businesses face is the:

federal reserve board of governors.

aggregate demand can be interpreted as the overall demand for real GDP from ___ different sources.

four

which of the following will cause investment to fall?

higher interest rates; lower expected returns

transaction money deman is determined by:

how much money people are going to spend in a given time period

when lily transfers $100 from her savings account into her checking account, M1 _________ and M2

increases by $100; remains the same

a decrease in the supply of money will cause

interest rate to rise and the quantity of investment demanded to fall

changing the money supply can affect

interest rates, thereby changing investment spending.

aggregate demand illustrates a(n) _______ relationship between level and the quantity of real GDP , or output, demanded.

inverse

_______ policy affects interests rates charged on loans and paid on savings

monetary

knowing how much ____ money an economy has matters because it helps determine interest rates and prices

money

the ___________ multiplier is the amount by which $1 change in reserves will change the money supply

money

money is a unit of account when

money is used to communicate the market value of goods and services.

money is a medium of exchange when:

money is used to facilitate trade between buyers and sellers

money is a store of value when

money is used to transfer wealth from the present o the future

your available redit on your home equity line of credit:

not in either M1 or M2

to influence the money supply and interest rates the federal reserve buys or sells government debt. this is called.

open market operations

lower U.S incomes tend to ______ U.S imports and ________ net exports

reduce; increase

if sam takes 1000 from his savings account to purchase microsoft stock, M1 and M2

remains the same; decreases by 1000

a _______ requirement specifies the fraction of check able deposits that a bank must keep on hand

reserve

the __________ requirement is the fraction of checkable deposits that banks must keep on hand as reserves, either as currency or on deposit with the federal reserve

reserve

the fraction of checkable deposits that banks must keep on hand as reserves, either as currency or on deposit with the federal reserve is called the:

reserve requirement

the money multiplier is the amount by which a $1 change in reserves will change the money __________

supply

by manipulating the money _______, the federal reserve can change ______ rates, thus encouraging or discouraging additional investment

supply; interest

the federal reserve can influence real GDP by changing the money ________, which will influence gross _____________

supply; investment

the federal reserve is not independent of government because

the U.S president nominates federal reserve governors;congress can decide to increase scrutiny of the feds accounting records; the president appoints the federal reserve chair person from among the federal reserve board of governors.

which three values are all related, so that when one changes, so do the others?

the dollar value of deposits held by banks, banks reserves, and the money supply

the money multiplier equals

the overall change in the money supply/ the initial change in reserves

the demand for money comes from two sources

transaction demand and asset demands.