Ch Monetary Policy

The money multiplier equals:

1/reserve requirement

The money multiplier equals:

1/reserve requirement.

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

Aggregate

_ monetary policy is sometimes referred to as "tight money."

Contractionary

Which of the following is a monetary policy tool used by the Federal Reserve?

Paying interest on excess reserves

How is a change in the money supply calculated when there is a change in excess reserves?

The change in the money supply equals a negative money multiplier (−1/rr) multiplied by the change in excess reserves.

The federal funds market is the market for borrowing and lending reserves between _.

banks

The _ rate is the interest rate at which banks can borrow money directly from the Federal Reserve.

discount

Governments use _ policy to keep prices stable and encourage economic growth.

monetary or fiscal

Governments use _ _ to keep prices stable and encourage economic growth.

monetary policy

The _ multiplier is the amount by which a $1 change in reserves will change the money supply.

money

The money _ is the amount by which a $1 change in reserves will change the money supply.

multiplier

When aggregate demand falls, to avoid a(n) _ and return to the long-run equilibrium, we must increase aggregate demand.

recession or contraction

The federal funds market is the market for borrowing and lending _ between banks.

reserves

If an economy experiences a change in excess reserves, the change in money supply will also depend on

the money multiplier.

The money multiplier equals:

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

The actions taken by a country's central bank to contract the money supply and raise interest rates is called:

tight money. contractionary monetary policy.

When aggregate demand falls, to increase aggregate demand, we can use _ monetary policy.

expansionary or easy

Which of the following refers to a liquidity trap?

A situation where increasing the money supply does not lower interest rates due to a flattening of the money demand curve.

Suppose the Federal Reserve is planning to conduct expansionary monetary policy during a recession. Which of the following is a tool they may consider using?

Reducing the interest rate paid on excess reserves

_ reserves are equal to deposits times the reserve requirement.

Required

The actions taken by a country's central bank to contract the money supply and raise interest rates is called _ monetary policy

contractionary

When aggregate demand rises too much to decrease aggregate demand, we can use _ monetary policy.

contractionary

The interest rate at which banks can borrow money directly from the Federal Reserve is called the:

discount rate.

The actions taken by a country's central bank to expand the money supply and lower interest rates is called _ monetary policy.

expansionary

When aggregate demand falls too much to increase aggregate demand, we can use _ monetary policy.

expansionary

The actions taken by a country's central bank to expand the money supply and lower interest rates is called:

expansionary monetary policy.

The market for borrowing and lending reserves between banks is the:

federal funds market

The time between when a policy is enacted and when it has its full effect on the economy is called the _ lag.

implementation

The time between when a policy is enacted and when it has its full effect on the economy is called the __ lag. The time between when an event affects an economy and the time when we recognize that effect in the data collected is called the __ lag.

implementation; recognition

The money multiplier is the amount by which a $1 change:

in reserves will change the money supply.

When aggregate demand rises, to avoid _ and return to the long-run equilibrium, we must decrease aggregate demand.

inflation

The _ rate is the payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved.

interest

The interest rate:

is the price of money.

A situation where increasing the money supply does not lower interest rates due to a flattening of the money demand curve refers to a(n) _ trap.

liquidity

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