Term
Contractionary monetary policy |
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Definition
The Federal Reserve's increasing interest rates to reduce inflation |
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Expansionary monetary policy |
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Definition
The Federal Reserve's decreasing interest rates to increase real GDP |
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The interest rate banks charge each other for overnight loans |
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Conducting monetary policy so as to commit the central bank to achieving a publicly announced level of inflation |
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The actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy goals |
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A rule developed that links the Fed's target for the federal funds rate to economic variables |
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Two main monetary policy targets |
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Definition
Money supply and interest rate |
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is concerned with the long-term real rate of interest |
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is concerned with the short-term nominal rate of interest |
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Term
long-run real rate of interest |
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Definition
the interest rate that is relevant when savers consider purchasing a long-term financial investment such as a corp. bond |
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short-term nominal interest rate |
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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 |
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loans granted to borrowers with flawed credit histories |
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adjustable-rate mortgages |
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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 |
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firms that participate in regular open market transactions with the fed |
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The possibility that managers of firms might make riskier investments if they believe the federal government will save them from bankruptcy |
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Term
Troubled Asset Relief Program (TARP) |
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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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