Term
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Definition
| the adjustment of the quantity of money in circulation to acheive specific enonomic goals |
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Term
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Definition
| America's decentralized central banking system managed by the Federal Reserve (1913) |
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Term
| Primary Elements of the Fed System |
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Definition
-Regional Fed Reserve Banks
-Board of Governors
-Federal Open Market Committee |
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Term
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Definition
-hold bank reserves
-collects checks
-supervises operations of members banks
-regulates money supply to the needs of the economy |
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Term
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Definition
-supervise banking system
-use monetary policy to assist economy in achieving full-employment level of output
-alter size of money supply |
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Term
| Federal Reserve Policy Tools |
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Definition
-open market operations
-reserve ratio
-discount rate |
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Term
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Definition
| the purchase or sale of government securities by the Fed System on the open market |
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Term
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Definition
| - the Fed determines a required ratio for each typer of deposit- the percentage of reserves reuqired for banks to back up their customer deposits |
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Term
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Definition
| the interest rate at which the Federal Reserve stans ready to lend reserves to commercial banks |
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Term
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Definition
| when Fed tries to increase money supply by expanding excess reserves to stimulate economy during recession |
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Term
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Definition
| Fed attempts to decrease the money supply by decreasing excess reserves to slow spending during inflation |
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Term
| Effectiveness of Monetary Policy |
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Definition
-speedier than fiscal policy
-less political
-cyclical assymetry |
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Term
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Definition
| a commodity widely used and freely accepted in exchange for goods and services |
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Term
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Definition
| ease with which an asset can be converted into the medium of exchange with littlel oss of value |
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Term
| Transaction Demand for Money (D1) |
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Definition
| amount of money people wasnt to hold as a medium of exchange |
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Term
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Definition
-medium of exchange
-unit of account
-store of value |
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Term
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Definition
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Term
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Definition
| currency that is money because the government says its money |
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Term
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Definition
| (checkable deposits) money payable on demand |
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Term
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Definition
| (time deposits) money stored for a period of time and not readily available |
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Term
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Definition
| consists of currency and traveler's checks plus checking deposits |
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Term
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Definition
| consits of M1 plus non-checkable deposits, money market deposit accounts, small time deposits, abd money market mutual funds |
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Term
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Definition
| not money but a way of obtaining money as a loan |
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Term
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Definition
| real value of money is what it can buy |
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Term
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Definition
| number of times money spent in a particular year |
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Term
| Types of Financial Insitutions |
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Definition
-commerical banks
-savings and loan associations
-savings banks and credit unions
-money market mutual funds |
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Term
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Definition
| a firm, licensed b a state agency or etc., to receive deposits and make loans |
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Term
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Definition
-savings and loan association
-savings banks
-credit unions |
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Term
| Savings and Loan Associations |
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Definition
| a financial intermediary that receives checking deposits and savings deposits and that makes person, commercial, and home-purchase loans |
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Term
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Definition
| a financial intermediary owned by its depositors that acceots deposits and makes mostly home-purchase loans |
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Term
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Definition
| a financial intermediary owned by its depositors that accepts savings deposits and makes mostly consumer loans |
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Term
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Definition
| a financial institution that obtains funds by selling shares and uses these funds to buy highly liquid assets such as U.S. Treasury bills |
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Term
| Services Provided by Financial Institutions |
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Definition
-create liquidity
-minimize cost of obtaining funds
-minimizing cost of monitoring borrowers
-pooling risk |
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Term
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Definition
| the deposits of most financial intermediaries are insured by the Federal Deposit Insurance Corporation (F.D.I.C.) |
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Term
| Bank Divides Funds into 2 Parts |
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Definition
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Term
| Fractional Banking System |
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Definition
(modern banking system)
only a portion of deposits backed by reserves |
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Term
| How do banks create more money? |
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Definition
-Reserves
-Creating deposits by making loans |
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Term
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Definition
| fraction of a bank's total deposits that are held in reserves |
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Term
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Definition
| the ratio of reserves to deposits that banks are required |
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Term
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Definition
| actual reserves minus required reserves (used to make loans) |
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Term
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Definition
| loans provided to borrowers who have a heightened perceived risk of default |
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Term
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Definition
| because of greater riskm lenders offset that by higher interest rate and credit enhancements |
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Term
| Sup Prime Loan Advantages |
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Definition
-offer opportunity to borrowers with less than ideal credit record to become homeowners
-lower interest rate were available
-large capital inflor to US from foreign investors
-surplus of loanable funds created |
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Term
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Definition
| use of federal budget to acheive macroeconomic objectives |
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Term
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Definition
-full employment
-sustained economic growth
-price level stability |
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Term
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Definition
| a change in fiscal policy that is triggered by the state of the economy |
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Term
| Discretionary Fiscal Policy |
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Definition
| a policy action that is initiated by an act of Congress |
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Term
| Countercyclical Financing |
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Definition
| in theory creating deficts during recession and surplueses during inflation |
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Term
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Definition
-personal income taxes
-social insurance taces
-corporate income taxes
-indirect taxes |
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Term
| Purpose of federal budget |
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Definition
-stabilize economy
-finance activities of the federal government |
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Term
| Fiscal Policy Expenditures |
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Definition
-transfer payments
-purchases of goods and services
-interest payments on national debt |
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Term
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Definition
| government programs that entitle qualifies people to receive benefits in form of transfer payments depending on economic state |
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Term
| Complications of Countercyclical Policy |
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Definition
-Timing
-Politics
-Crowding Out Effect |
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Term
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Definition
| the time between when an actual economic shock occurs and when it is recognized by economists, bankers, and the government |
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Term
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Definition
| time elapsed between the recognition of a problem and the action taken to handle it |
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Term
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Definition
| period between when the policy is implemented, and the point where it starts to take off |
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Term
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Definition
| the government borrowing to finance the deficit, pushing out private practices |
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Term
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Definition
| change in government expenditures or tazes which occurs automatically as a result of existing laws |
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Term
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Definition
| the annual statement of the federal government's expenditures and tax revenues |
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Term
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Definition
| if tax revenues exceed expenditures |
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Term
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Definition
| if expenditures receive tax revenues |
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Term
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Definition
| if tax revenues equal expenditures |
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Term
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Definition
| total supply of all products in macroeconomy |
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Term
| Causes for change in aggregate supply |
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Definition
-technological growth
-sharp change in the conditions of production |
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Term
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Definition
| total demand for products across the entire economy |
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Term
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Definition
| supply creates its own demand |
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Term
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Definition
| demand creates its own supply |
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Term
| Expansionary Macroeconomic Policy |
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Definition
| a policy of increasing aggregate demand or buying power in an economy |
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Term
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Definition
| policies used to reduce aggregate demand |
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Term
| Who conducts fiscal policy? |
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Definition
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Term
| What quasi part of the government controls monetary policy? |
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Definition
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