Macro | ECO 2013 - Principles of Economics-Macro, Quizzes of Introduction to Macroeconomics

Download Macro | ECO 2013 - Principles of Economics-Macro and more Quizzes Introduction to Macroeconomics in PDF only on Docsity! TERM 1 Discount Rate DEFINITION 1 Refers to the interest rate that the Federal Reserve District Bank charges a member bank on loans. When the discount rate is reduced, money is created. When it is raised, moneyis destroyed. TERM 2 Token Money DEFINITION 2 coins that have no intrinsic value TERM 3 M1 DEFINITION 3 currency in circulation plus checkable deposits. Its called money. Over 50% of M1 is indemand deposits TERM 4 M2 DEFINITION 4 everything thats in M1 plus time deposits or savings accounts. Its referred to as NearMonies. TERM 5 Federal Reserve Board of Governors DEFINITION 5 has 7 members each serving a staggered 14 yearterm. TERM 6 Excess Reserves DEFINITION 6 are the basis for commercial bank lending. An individual bank can only lend to the fullest extent of its excess reserves. They are the amount by which the banks actual reserves exceed its required reserves. TERM 7 Required Reserves DEFINITION 7 are fractional because they are less than 100%. They are a specifiedpercentage of a banks pain-in demand deposits that must be sent forward to the Federal Reserve. TERM 8 Reserves DEFINITION 8 In the Federal Reserve Banking System, reserves lost by a single bank are not lost to the system as a whole. TERM 9 Federal Reserve buying and selling bonds (gov. securities) DEFINITION 9 during a recession the Federal Reserve buys government securities or bonds. The money supply then increases. During inflation the Federal Reserve sells government bonds and the money supply decreases. This also applies to commercial banks buying and selling government bonds. TERM 10 Dollar appreciates DEFINITION 10 when the dollar appreciates its called a strong dollar. It buys more foreign currency. TERM 21 Production possibility curve DEFINITION 21 demonstrates the limit of attainable outputs. It also demonstrates allocative and production efficiency. TERM 22 Government spending DEFINITION 22 increased government spending will increase the GDP. Decreased government spending will decrease the GDP. TERM 23 Government regulation DEFINITION 23 increases per unit production costs and reduces supply. It alsoretards economic growth. TERM 24 Easy money policy DEFINITION 24 when the Federal Reserve engages in an easy money policy itsattempting to increase private spending. In easy money policy the Fed can decrease the reserve requirement, decrease the discount rate, decrease the federal funds rate, buy government securities, or a combination. Easy money policy is used to expand the money supply. TERM 25 Tight money policy DEFINITION 25 when the Federal Reserve is engaged in tight money policy, it isattempting to slow down private spending. Obviously what they will do is increase the reserve requirement, increase the discount rate, increase the federal funds rate, sell government securities, or a combination. Tight money policy is used to contract the money supply. TERM 26 Prime interest rate DEFINITION 26 the rate commercial banks charge their favorite or best customers TERM 27 Monetary multiplier DEFINITION 27 also called the demand deposit multiplier. It refers to the number oftimes each dollar is spent in the economy in one year. Monetary multiplier applies to both money expansion and money destruction. The GDP divided by total expenditures in Consumption (C)and Gross Private Domestic Spending (Ig) is regarded as the number of times the average dollar is spent on goods and services each year TERM 28 Transactional demand for money DEFINITION 28 refers to the money people hold as cash for the payment of day-to-day expenses. It does not vary with the GDP. It varies with opportunity cost. TERM 29 Fiat money DEFINITION 29 Paper money and is money only because the government says it is money. It also cannot be converted into gold. The paper money in your pocket if fiat money. TERM 30 Legal tender DEFINITION 30 what you must take in payment of debt public or private. This is the dollar bills you have in your pocket. TERM 31 Token Money DEFINITION 31 refers to coins that have no intrinsic value. They have no metal in them equal TERM 32 Supply of Money DEFINITION 32 The supply of money determines the purchasing power of the monetary unit. A lower price level increases the real purchasing power of the monetary unit. Buying something at Wal-Mart as opposed to buying something at Tiffanys. All paper money in circulation are Federal Reserve Notes. TERM 33 Commercial bank loans DEFINITION 33 When a commercial bank extends or makes a loan, money iscreated. When a loan is paid off, money is destroyed. When the bank extends a loan, both assets and liabilities are increased. TERM 34 Tariffs DEFINITION 34 are a monetary restriction on imports. TERM 35 Say's Law DEFINITION 35 Supply creates its own demand TERM 46 Production (input) costs DEFINITION 46 Higher production input costs increase per unit production costs and reduce aggregate supply. TERM 47 Demand-pull inflation DEFINITION 47 If the economy is at full production and demand continues to grow,prices will rise. This is called demand-pull inflation. TERM 48 Cost-push inflation DEFINITION 48 As the economy reaches full employment, the cost of the inputs will push up the price level. This is cost-push inflation. TERM 49 Contractionary fiscal policy DEFINITION 49 is designed to decrease private spending. If you decreaseprivate spending by increasing taxes, decreasing government spending, or a combination, this is Contractionary fiscal policy. TERM 50 Expansionary fiscal policy DEFINITION 50 is used to increase private spending. They can reduce taxes,increase government spending, or a combination TERM 51 Political business cycle DEFINITION 51 when politicians manipulate fiscal policy to maximize voter support. TERM 52 Checkable deposits DEFINITION 52 are also known as demand deposits. These are checking accounts. TERM 53 Time deposits DEFINITION 53 are savings accounts of all types TERM 54 Monetarizing the debt DEFINITION 54 when a commercial bank extends or makes a loan, it exchanges apromissory note for a demand deposit, which is a checking account, it creates money. It is called monetarizing the debt TERM 55 Check drawn against one bank DEFINITION 55 when a check is drawn (written) against one bank anddeposited in another, the bank against whom it is drawn (written) loses reserves and demand deposits to the face value of the check. The bank into which it is deposited gains reserves and demand deposits to the face value of the check. TERM 56 Functions of the Federal Reserve DEFINITION 56 one of the main functions of the Federal Reserve is to clear checks, but its most important function is to control the money supply. TERM 57 Till money or vault cash DEFINITION 57 cash held by a bank is called till money or vault cash. This is themoney held by a bank for its day-to-day operations. TERM 58 Crowding out effect DEFINITION 58 when the federal government finances its deficit by borrowing, privateinvestment is crowded out. TERM 59 Commercial Banks DEFINITION 59 when a commercial bank buys government bonds, money is created. TERM 60 Money supply DEFINITION 60 The U.S. money supply is backed by the full faith and credit of the U.S. government.