Test- Money Market, Loanable Funds, etc

Rate of Inflation

The percentage increase in the general price level of goods and services over a period of time, typically measured annually.

Inflation

Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power.

Demand Pull Inflation

when the aggregate demand curve shifts, increasing inflation

cost push inflation

when the supply curve shifts, increasing inflation

cost of living adjustment

an increase in wages or benefits to account for the rising cost of goods and services.

fixed income

investments with a predetermined, regular payment schedule, such as bonds or certificates of deposit.

Consumer Price Index

measures changes in average prices paid by consumers for goods and services, reflecting inflation or deflation in the economy.

closed shop union

employer agrees to hire only union members

union shop

employees must join the union within a specific period of time

agency shop

employees are required to pay union dues, but it join the union

open shop union

union membership is optional

weapons of unions- strikes

employees refuse to work

weapons of unions- strike fund

money to sustain the union members and pay for union activities during a strike

weapons of unions- picketing

workers parade outside strike-bound premises

weapons of unions- boycott

workers request the people do not buy products from the company

weapons of unions- publicity

workers appeal to public through mass media and demonstrations

weapons of management- strikebreakers- scabs

other workers hired to fill positions of full time employees

weapons of management- financial resources

reserves to cover overhead costs

weapons of management- lockout

union workers are not allowed to come to work

weapons of management- injunction

court order to force workers to terms

weapons of managment- publicity

appeal to public using mass media

kinds of money- commodity money

a product that is used as a medium of exchange

kinds of money- paper money/ fiat money

money that has no intrinsic value

it is money because the government says so

bank money

checks, credit cards, stocks

money because a financial institution will exchange into money

crypto currency

fluctuates based on supply and demand

M1

Transaction Money

coins and paper money (currency outside of financial institutions)

checking accounts (demand deposits)

M2

Broad Money

All items in M1, savings accounts, money market mutual funds

Near Money

liquid assets that are close substitutes for money

liquidity

ease at which an asset can be converted into cash

How do banks create money?

T Accounts (look over how to do them in notes)

money

anything that serves as a commonly accepted medium of exchange

barter

trading goods for goods

why is money better than barter?

generally accepted medium of exchange

it’s divisible

it’s portable

it’s durable

it’s a store of value (you can save it)

Simple money multiplier (how much money did the bank create?)

M1= original x 1/ RR

Bank created: M1- original

Asset

what the bank has

liability

what the bank is responsible for returning

Rate of Inflation Formula

ROI= [ (CPI t - CPI t-1) / CPI t-1 ] x100

money market graph

demand for money

asset demand

demand for money to hold on as a financial asset

transactions demand

demand for money as a medium of exchange

Money market powers of the fed

open market operations

discount rate

reserve requirement

if the fed buys bonds, the supply shifts right

loanable funds/ demand for investment

helps determine investment based on funds available and funds needed

Which graph is nominal interest rate on?

Money Market Graph Y-Axis

Which graph is real interest rate on?

Lonable Funds Graph Y-Axis