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Macroeconomics Ch 15 Hubbard & O'brien 4th ed
ch 15
16
Economics
Undergraduate 2
06/22/2012

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Term
Contractionary monetary policy
Definition
The Federal Reserve's increasing interest rates to reduce inflation
Term
Expansionary monetary policy
Definition
The Federal Reserve's decreasing interest rates to increase real GDP
Term
Federal Funds rate
Definition
The interest rate banks charge each other for overnight loans
Term
Inflation targeting
Definition
Conducting monetary policy so as to commit the central bank to achieving a publicly announced level of inflation
Term
Monetary policy
Definition
The actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy goals
Term
Taylor rule
Definition
A rule developed that links the Fed's target for the federal funds rate to economic variables
Term
Two main monetary policy targets
Definition
Money supply and interest rate
Term
Loanable funds model
Definition
is concerned with the long-term real rate of interest
Term
Money_market model
Definition
is concerned with the short-term nominal rate of interest
Term
long-run real rate of interest
Definition
the interest rate that is relevant when savers consider purchasing a long-term financial investment such as a corp. bond
Term
short-term nominal interest rate
Definition
Most relevant interest rate when conducting monetary policy because it is the interest rate most affected by increases and decreases in the money supply
Term
subprime loans
Definition
loans granted to borrowers with flawed credit histories
Term
adjustable-rate mortgages
Definition
allowed borrowers to pay a very low interest rate for the first few years of the mortgage and a higher rate in later years
Term
primary dealers
Definition
firms that participate in regular open market transactions with the fed
Term
moral hazard problem
Definition
The possibility that managers of firms might make riskier investments if they believe the federal government will save them from bankruptcy
Term
Troubled Asset Relief Program (TARP)
Definition
passed by congress 2008, under which the treasury attempted to stabilize the commercial banking system by providing funds in exchange for stock
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