Econ

According to the definition of money in chapter 4, which of the assets below would be included when calculating total money balances in the economy?

currency and checkable deposits

What is the appropriate way to conceptualize currency in a modern economy?

as a liability of the central bank

What is an expansionary open market operation?

the purchase of bonds by the central bank in order to increase the money supply

What is an effect a ceteris paribus decline in bond prices

interest rates rise

Consider two bonds of same maturities but different risks of default. Which of the following is true in equilibrium, when investors are risk neutral:

the riskier bond should have a higher interest rate.

All else equal, an investors are risk neutral, an increase in the perceived probability of default of a bond should:

result in a higher risk premium on that bond

Which of the options below is a good description of quantitative easing?

Purchases of long-term government bonds, as well as agency-backed and private bonds by the central bank.

According to the graph shown in the Video, which asset category currently accounts for most of the Fed's assets?

Traditional security holdings.

when policy rates are constrained by the zero lower bond (i.e. i=0i=0):

A rise in expected inflation, all else equal, lowers the real policy rate and boosts spending.

The IS curve is downward sloping because equilibrium in the

goods market implies that interest rate and output are inversely related.

The LM curve is horizontal because equilibrium in

financial markets implies that as output​ increases, the central bank adjusts the money supply to maintain its interest rate target.

Investment is

positively related to the level of sales and negatively related to the interest rate.

ffect of an increase in government​ spending? An increase in government spending

increases output

The real interest rate is equal to the nominal interest rate

minus the inflation rate.

Which of the following factors determines the risk premium that bond holders require to hold​ bonds?

Bond​ holders' degree of risk aversion.

​Borrowers' probability of default

In the ​IS-LM​ framework, the​ ________ interest rate directly reflects central bank​ actions, while the​ ________ rate is taken as the relevant rate for consumers and firms

policy; borrowing