Monetary policy (Ample Reserves)

Monetary Policy (ample reserves)

Acttions taken by a countrys central bank tp influence output, prices and employment by managing certain key interest rates in the economy

Expansionary monetary policy (ample reserves)

The actions taken by a countrys central bank to lower market interest rates with the objective of increasing real GDP and reducing unemployment

Contractionary Monetary Policy (ample reserves)

The actions taken by a country’s central bank to raise market interest rates with the objective of decreasing real GDP and controlling inflation

Prime rate

The lowest commercially availabe interest rate

Administered rates

interest rates that are set by the fed. they are not market determined rates

Discount rate (DR)

The interest rate banks pay on money borrowed directly from the Fed

Interest on reserve balances rate (IORB)

The rate of interest banks earn on reserve deposits held at the Fed

Open-market operations

The purchase or sale of government securities by a central bank; a key tool of monetary policy used to influence the money supply and interest rates

Overnight reserve repurchase agreement facility rate (ON RRP)

the rate of interest that is paid to certain large nonbank financial institutions on overnight financial agreements with the fed

Reservation rate

The lowest interest rate that banks are willing to accept when lending out funds

Upper bound

the interest rate set by the Fed that determines the top or upper limit, of the target range for the federal funds rate

Change in aggregate demand formula

Change in AD = multiplier E x Change in expenditures