Ch Monetary Policy

The money multiplier equals:

1/reserve requirement

The money multiplier equals:

1/reserve requirement.

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.

_ 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

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

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

discount

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.

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

expansionary or easy

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

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 _ 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 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.