Chap 15 Flashcards
when depositors race to the bank to withdraw their deposits for fear that otherwise they would be lost
bank run
money supply * velocity = nominal GDP
basic quantity equation of money
institution which conducts a nation’s monetary policy and regulate its banking system
central bank
a monetary policy that reduces the supply of money and loans
contractionary monetary policy; also called tight monetary policy
moving in the opposite direction of the business cycle of economic downturns and upswings
countercyclical
an insurance system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupts
deposit insurance
the interest rate charged by the central bank on the loans that it gives to other commercial banks
discount rate
reserves banks hold that exceed the legally mandated limit
excess reserves
a monetary policy that increase the supply of money and the quantity of loans
expansionary monetary policy; also called loose monetary policy
the interest rate at which one bank lends funds to another bank overnight
federal funds rate
a rule that the central bank is required to focus only on keeping inflation low
inflation targeting
an institution that provides short-term emergency loans in conditions of financial crisis
lender of last resort
the central bank selling or buying Treasury bonds to influence the quantity of money and the level of interest rates
open market operations
the purchase of long term government and private mortgage-backed securities by central banks to make credit available in hopes of stimulating aggregate demand
quantitative easing (QE)
the percentage amount of its total deposits that a bank is legally obligated to either hold as cash in their vault or deposit with the central bank
reserve requirement
