ECON 202 Exam 3

reserve ratio

the portion of deposits that banks keep on reserve

discount rate

rate of interest paid by private banks to the Fed

discount loans

money lent by the Fed to private banks

open market operations

the purchase or sale of bonds by the central bank

interest on reserves balances (IORB)

the rate of interest paid by the Fed on bank reserves deposited with the Fed

discount loans

money lent by the Fed to private banks

lending facilities

the Fed’s tool for issuing loans to firms in targeted at-risk industries

federal funds rate

rate of interest paid on interbank loans

federal funds

money deposited with the Fed by private banks

discount rate

rate of interest paid by private banks to the Fed

government budget

a plan for both raising and spending funds for governmental activities

discretionary outlays

spending that is adjustable during the annual budget process

expansionary fiscal policy

cut taxes and increase government spending

contractionary fiscal policy

raise taxes and decrease government spending

change in consumption / change in income

MPC equation

1 / (1 - MPC)

spending multiplier equation

crowding out

when private spending or investment falls in response to increases in government spending

open market operations

buying and selling of bonds

ultimate goal of fiscal policy

shift AD

1/rr

money multiplier equation

expansionary monetary policy

buy bonds and lower reserve ratio, interest rates, & IOR

contractionary monetary policy

sell bonds and raise reserve ratio, interest rates, & IOR

shift from expansionary monetary policy

AD shifts right

shift from contractionary monetary policy

AD shifts left

stagflation

recession caused by a shift in the AS