Studied by 4 peopleReserve requirements
________: set by the Fed, the minimum values of the ratio of bank reserves to bank deposits that commercial banks are allowed to maintain.
Quantitative easing
________ (QE): expansionary monetary policy in which a central bank buys financial assets from private financial institutions, thereby lowering the yield or return of those assets while increasing the money supply.
Federal Reserve
The ________ controls the nominal interest rate by changing the supply of money.
real interest
To fight a recession (a recessionary output gap), the Fed lowers the ________ rate, stimulating planned spending and output.
Federal Open Market Committee
________ (FOMC): committee that makes decisions concerning monetary policy.
Discount
________ window lending: lending of reserves by the Federal Reserve to commercial banks.
allocation decision
Portfolio ________: decision about the forms in which to hold one's wealth.
Deposit insurance
________: system under which the government guarantees that depositors will not lose any money even if their bank goes bankrupt.
reserve requirements
An increase in discount window lending, a reduction in ________, a decrease in the interest rate paid on required reserves, or quantitative easing will all have the same effect.
real interest
Through its control of the ________ rate, the Fed is able to influence planned spending and short- run equilibrium output.
real interest
An increase in the ________ rate reduces both consumption spending and planned investment spending.
Board of Governors
leadership of the Fed, consisting of seven governors appointed by the president to staggered 14-year terms
Federal Open Market Committee (FOMC)
committee that makes decisions concerning monetary policy
Banking panic
situation in which news or rumors of the imminent bankruptcy of one or more banks leads bank depositors to rush to withdraw their funds
Deposit insurance
system under which the government guarantees that depositors will not lose any money even if their bank goes bankrupt
Federal funds rate
interest rate that commercial banks charge each other for very short-term (usually over night) loans; because the Fed frequently sets its policy in terms of the federal funds rate, this rate is closely watched in financial markets
Portfolio allocation decision
decision about the forms in which to hold one's wealth
Demand for money
amount of wealth an individual or firm chooses to hold in the form of money
Money demand curve
curve that shows the relation ship between the aggregate quantity of money demanded M and the nominal interest i; rate i; because an increase in the nominal interest rate in creases the opportunity cost of holding money, which re duces the quantity of money demanded, the money demand curve slopes down
Discount window lending
lending of reserves by the Federal Reserve to commercial banks
Discount rate = primary credit rate
interest rate that the Fed charges commercial banks to borrow reserves
Reserve requirements
set by the Fed, the minimum values of the ratio of bank reserves to bank deposits that commercial banks are allowed to maintain
Quantitative easing (QE)
expansionary monetary policy in which a central bank buys financial assets from private financial institutions, thereby lowering the yield or return of those assets while increasing the money supply
Board of Governors
Leadership of the Fed, consisting of seven governors appointed by the president to staggered 14-year terms
Federal Open Market Committee (FOMC)
Committee that makes decisions concerning monetary policy
Banking panic
Situation in which news or rumors of the imminent bankruptcy of one or more banks leads bank depositors to rush to withdraw their funds
Deposit insurance
System under which the government guarantees that depositors will not lose any money even if their bank goes bankrupt
Federal funds rate
Interest rate that commercial banks charge each other for very short-term (usually over night) loans; because the Fed frequently sets its policy in terms of the federal funds rate, this rate is closely watched in financial markets
Portfolio allocation decision
Decision about the forms in which to hold one's wealth
Demand for money
Amount of wealth an individual or firm chooses to hold in the form of money
Money demand curve
Curve that shows the relation ship between the aggregate quantity of money demanded M and the nominal interest i: rate i; because an increase in the nominal interest rate in creases the opportunity cost of holding money, which re duces the quantity of money demanded. the money demand curve slopes down
Discount window lending
Lending of reserves by the Federal Reserve to commercial banks
Discount rate = primary credit rate
Interest rate that the Fed charges commercial banks to borrow reserves
Reserve requirements
Set by the Fed, the minimum values of the ratio of bank reserves to bank deposits that commercial banks are allowed to maintain
Quantitative easing (QE)
Expansionary monetary policy in which a central bank buys financial assets from private financial institutions, thereby lowering the yield or return of those assets while increasing the money supply
Note 
Flashcard (87)