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
