15 Monetary Policy Flashcards
management of interest rates and total supply of money in circulation
monetary policy
government policy
monetary policy and fiscal policy
stabilize overall level of output and price through money supply control
monetary policy
collective term for taxing and spending actions of governments
fiscal policy
stabilize economy through changes in gov’t spending/taxation
fiscal policy
types of monetary and fiscal policy
expansionary and contractionary
common thoughts about money
- money is the root of all evil
- time is money
- money doesn’t grow on trees
- when money talks, everybody listens
functions of money
- medium of exchange
- unit of account (measure)
- store of value
value comes from commodity of which it is made, consists of objects that have value in themselves (intrinsic value) as well as value in their use as money
commodity money
decreed by the gov’t and accepted by the people
fiat money
another name for fiat money
legal tender
medium of payment recognized by legal system to settle a financial obligation
fiat money
depends for its value on condifence that it will be generally accepted as a medium of exchange
fiduciary money
issuer promises bearer that it will be exchanged as requested
fiduciary money
bouncing check/no sufficient fund check gives issuer a
penalty
“I Owe You”
IOU
debt instrument/certificate
IOU
credit cards and debt cards
plastic money
money that doesn’t need to be touched to be exchanged
digital money
characteristics of money
- durability
- portability
- divisibility
- stability
- acceptability
↓ money supply
contractionary
↑ interest rate
contractionary
discourages investment spending
contractionary
↓ overall demand
contractionary