Chapter 15- Scetion 3

Question 0

What does the long run monetary policy affect?

Answer 0

Inflation and economic growth

Question 1

What does the short run monetary policy affect?

Answer 1

Interest rates and availability of credit

Question 2

When the Fed expands the money supply, the cost of credit goes (up/down). When the Fed contracts the money supply, the cost of credit goes (up/down)

Answer 2

Down; up

Question 3

The best or lowest interest rate commercial bankers charge their customers

Answer 3

Prime rate

Question 4

When changes in supply of money affect the general level of prices

Answer 4

Quantity theory of money

Question 5

Create enough extra money to offset deficit spending in order to keep interest rates from changing

Answer 5

Monetize the debt

Question 6

Repeated short run attempts to keep rates low result in a long-term expansion of the money supply making what worse?

Answer 6

Inflation

Question 7

The market rate of interest minus the rate of inflation

Answer 7

Real rate of interest

Question 8

When the Fed conducts monetary policy what issues does it consider?

Answer 8

Timing and burden, present versus future allocation, and defining money

Question 9

Interest rates and inflation affect the allocation of what?

Answer 9

Scarce resources between present and future users

Question 10

Represents the transactional component of the money supply, or the components of the money supply that most closely match money’s role as a medium of exchange

Answer 10

M1

Question 11

M1 includes what?

Answer 11

Traveler’s checks, coins, currency, demand deposits, and other checkable deposits such as NOW accounts and credit union share drafts

Question 12

A measure of money that includes those components most closely conforming to money’s role as a store value

Answer 12

M2

Question 13

M2 includes what?

Answer 13

M1, small denomination time deposits, saving deposits, and money market funds