Ugh Etc Flashcards
Raising he reserve requirement does what to the money supply
Lowers the money supply
Raising the money supply is expansionary monetary policy
True
In normal times banks hold as little in reserves as possible
True
The reserve ratio
The reserves that banks keep relative to deposits
Who determines the U.S. monetary policy?
The federal reserve
In the short run if the fed undertakes expansionary monetary policy, the effect will be to shift the:
AD curve out to the right
An effect of an expansionary monetary policy is to:
Lower interest rates
When the fed increases the reserve requirement, it:
Contracts the money supply because banks have less to lend
The discount rate is the interest rate:
The fed charges on loans to comercial banks
Suppose the money multiplied in the U.S. is 2.5 if the fed wants to reduce the money supply by 1,000 it should:
Sell govt securities worth 400
If the fed simultaneously reduces the discount rate and the required reserve ratio, the money supply will:
Expand
What 3 things does an expansionary monetary policy do according to the AS/AD model?
- Decreases interest rates
- Raises investment
- Increases income
The concept of fiscal policy refers to the:
Running of a deficit or surplus to affect the level of output in the economy
Reducing the budget deficit by cutting govt spending could:
Increase income if interest rates fall enough and private investment is more productive than govt spending
Who determines fiscal policy?
Congress and the administration
