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bank run
when depositors race to the bank to withdraw their deposits for fear that otherwise they would be lost
basic quantity equation of money
money supply x velocity = nominal GDP
central bank
institution which conducts a nation's monetary policy and regulates its banking system
contractionary monetary policy
a monetary policy that reduces the supply of money and loans
countercyclical
moving in the opposite direction of the business cycle of economic downturns and upswings
deposit insurance
an insurance system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupt
discount rate
the interest rate charges by the central bank on the loans that it gives to other commercial banks
excess reserves
reserves banks hold that exceed the legally mandated limit
expansionary monetary policy
a monetary policy that increases the supply of money and the quantity of loans
federal funds rate
the interest rate at which one bank lends funds to another bank overnight
inflation targeting
a rule that the central bank is required to focus only on keeping inflation low
lender of last resort
an institution that provides short-term emergency loans in conditions of financial crisis
loose monetary policy
see expansionary monetary policy
open market operations
the central bank selling or buying Treasury bonds to influence the quantity of money and the level of interest rates
quantitative easing (QE)
the purchase of long term government and private mortgage-backed securities by central banks to make credit available in hopes of stimulating aggregate demand
reserve requirements
the percentage amount of its total deposits that a bank is legally obligates to either hold as cash in their vault or deposit with the central bank
tight monetary policy
see contractionary monetary policy
velocity
the speed with which money circulates through the economy: calculated as the nominal GDP divided by the money supply
automatic stabilizers
tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down and restraining aggregate demand when the economy speeds up, without any additional change in legislation.
balanced budget
when government spending and taxes are equal
budget deficit
when federal government spends more money that it receives in taxes in a given year
budget surplus
when the federal government receives more money in taxes than it spends in a year
contractionary fiscal policy
fiscal policy that decreases the level of aggregate demand, either through cuts in government spending or increase in taxes
corporate income tax
a tax imposed on corporate profits
crowding out
federal spending and borrowing causes interest rates to rise and business investment to fall
discretionary fiscal policy
the government passes a new law that explicitly changes overall tax or spending levels with the intent of influencing the level of overarl economic activity
estate and gift tax
a tax on people who pass assets to the next generation - either after death or during life in the form of gifts
excise tax
a tax on a specific good - on gasoline, tobacco, and alcohol
expansionary fiscal policy
fiscal policy that increases the level of aggregate demand, either through increases in government spending or cuts in taxes
implementation lag
the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs
individual income tax
a tax based on the income, of all forms, received by individuals
legislative lag
the time it takes to get a fiscal policy bill passed
marginal tax rates
or the tax that must be paid on all yearly income
national debt
the total accumulated amount the government has borrowed, over time, and not yet paid back
payroll debt
a tax based on the pay received from employers; the taxes provide funds for social security and medicare
progressive tax
a tax that collects a greater share of income from those with high incomes than from those with lower incomes
proportional tax
a tax that is a flat percentage of income earned, regardless of level of income
recognition lag
the time it takes to determine that a recession ahs occured
regressive tax
a tax in which people with higher incomes pay a smaller share of their income in tax
standardized employment budget
the budget deficit or surplus in any given year adjusted for what it would have been if the economy were producing at potential GDP
absolute advantage
when one country can use fewer resources to produce a good compared to another country; when a country is more productive compared to another country
gain from trade
a country that can consume more than it can produce as a result of specialization and trade
intra-industry trade
international trade of goods within the same industry
splitting up the value chain
many of the different stages of producing a good happen in different geographic locations
tariffs
taxes that governments place on imported goods
value chain
how a good is produces in stages
comparative advantage
when a country can produce a good at a lower cost in terms of other goods
opportunity cost
loss of the next best alternative foregone when making a decision
Jerome Powell
Who is the current Chair of the Federal Reserve Board
the Reserve Bank's Class B and C directors (subject to approval of the Federal Reserve Board of Governors)
Who appoints the 12 regional Federal Reserve bank Presidents
12
how many federal reserve bank presidents are there?
the president
who appoints the board of governors
seven
how many board of governors are there?
FDIC
federal deposit insurance corporation
FOMC
Federal open market committee
7 members of the Board of Governors of the Federal Reserve System, President of the Federal Reserve Bank of NY, and 4 of the remaining 11 Reserve Bank presidents, who serve 1 yr terms on a rotating basis
who makes up the FOMC
M*V=P*Q
equation of exchange
specialization
a method of production whereby an entity focuses on the production of a limited scope of goods to gain a greater degree of efficiency
comparative costs
based on the differences in production costs of similar commodities in different countries
(money supply x velocity) = (price level x real gdp)
written out equation of exchange
Note 
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