Econ monetary policy

Open Market Operations

the purchase and sale of U.S. government bonds by the Fed

Excess reserves

reserves greater than the required amounts

Required reserves

the dollar amount of reserves a bank is obligated by regulation to hold

discount rate

The interest rate on the loans that the Fed makes to banks

expansionary monetary policy

increases money supply to fight unemployment/recession

contractionary monetary policy

decreasing money supply to fight inflation

Difference between flow and stock variables? give ex.

flow - variables measured over time - income

stock - variables measured at a moment in time - money

What is the Federal Reserve System's principal objective?

to be a bank for banks

What is the Fed comprised of?

12 central banks

Who controls the Fed? Who oversees them?

seven member board of governors - accountable to congress

How can the president influence Fed policy?

by appointing governors

Who makes up the Federal Open Market Committee (FOMC)? Who gets to vote on money supply and interest rates.

board of governors and the 12 fed bank presidents. the board gets to vote, and rotating through the presidents

What are the 3 actions the Fed uses to control M.S. and Interest Rates?

open market operations

lending to banks

reserve requirements

What is the horizontal and vert axis of money supply graph

y axis - interest rate

x axis - quantity of money

What is the opportunity cost of holding money

interest rate

what causes a shift in the money demand curve and supply curve?

Money Supply-

Open market operations, reserve req, discount rate

Money Demand-

change in nominal GDP

What causes a movement along money supply curve

interest rate

What equilibrates the money supply

interest rate

Which of the components of AD are most sensitive to monetary policy

investment and net exports