Econ monetary

Question 1

great depression

Answer 1

bc of contraction of money supply

Question 2

characteristics of money

Answer 2

hard to copy
durable
portable
divisable
limited
acceptable

Question 3

functions of money

Answer 3

medium of exchange

store of value (inflation)

standard of value for comparison

Question 4

M0

Answer 4

cash/coin

Question 5

M1

Answer 5

M0, demand deposit/check

Question 6

M2

Answer 6

M1 n small saving account

show stock of money

Question 7

liquidity

Answer 7

ability to take form of cash quickly. If npt liquid can’t sell or turn into money

Question 8

monetary policy

Answer 8

alter supply of money/interest rates to help econ

Question 9

discount rate

Answer 9

interest rate that banks are charged when borrow from FED
weakest tool
recession: lower DR
Inflation: raise DR

banks usually charge higher if used

Question 10

reserve requirement

Answer 10

% of deposits that banks must hold onto n not loan (10%)

most powerful tool

Question 11

open market opration

Answer 11

buying/selling gov bonds to give banks money supply

most important

recession: buy bonds n lower interest rate
inflation: sell bonds to decrease money supply

Question 12

increase supply of money= increase demand

Answer 12

if demand is higher than supply=inflaion

if supply is lower than demand: recession

Question 13

settlement

Answer 13

money from one’s account to bank

Question 14

fed fund rate

Answer 14

interest rate that BANKS pay another BANKS for an overnight loan

Question 15

lower rates of loans by

Answer 15

buying bonds= lower fed fund rate= lower prime rate

vice versa

Question 16

prime rate

Answer 16

rate that banks charge their best business

lowest rate of interest which money can be borrowed

decrease in prime rate decreases other rates

Question 17

balanced sheet of a bank

Answer 17

assets: required n excess reserves, loans, bonds
liability: demand deposit

Question 18

money multiplier

Answer 18

1/ reserve requirement

Question 19

required reserves + excess reserve/loans/bonds=

Answer 19

demand deposit

Question 20

personal money supply max

Answer 20

multiply deposit by moneymultiplier. subtract answer by deposit.

multiply excess reserve by moneymultiplier

Question 21

FED money supply max

Answer 21

multiply deposit by moneymultiplier

Question 22

expansionary

Answer 22

buy bonds DR/RR decreases

Question 23

increase money demand

Answer 23

increase GDP

increase price level

Question 24

money market graph

Answer 24

nominal interest rate vs quantity of money

AD n MS

Question 25

graph expansionary

Answer 25

MS moves right

AD/AS increase AD

Question 26

contractionary graph

Answer 26

MS moves left

AD/AS decrease AD