Master this deck with 155 terms through effective study methods.
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Allows purchasing power to be transferred to the future.
M1 decreases by $2,100.
Store of value.
Liquid and a store of value.
Traveler’s checks.
Store of value.
Unit of account.
Medium of exchange.
Savings deposits.
Listing prices in dollars.
It is generally accepted in trade.
Setting or altering the money supply.
The Federal Open Market Committee.
Acts as a lender of last resort.
The president of the U.S.
The FOMC.
The Board of Governors.
It is not due to higher population.
Members of the Board of Governors and some Federal Reserve Bank presidents.
The money supply decreases.
Store of value, unit of account, medium of exchange.
Barter system.
Store of value.
Unit of account.
Medium of exchange.
Has intrinsic value even if not used as money.
Valuable due to government decree.
Can be exchanged for a fixed amount of a commodity.
1971.
Requires both parties to want what the other has.
Erodes purchasing power and makes prices unreliable.
Assets that store value but can't be used as a medium of exchange.
Total quantity of money in the economy.
Checking account balances available on demand.
CDs under $100,000 locked for a fixed period.
Invest in short-term, low-risk securities.
Neither; they are a borrowing method.
No, only public-held currency counts.
Yes, up to $250,000 per depositor.
No, unlike bank deposits.
Different assets have different liquidity levels.
M2 is always larger.
M1 is more liquid; M2 includes near money.
Immediate transactions.
M1 plus assets not used directly as a medium of exchange.
Value of the physical material of an item.
Value printed on currency.
Face value exceeds intrinsic value.
Currency that must be accepted for debts.
Extremely rapid inflation affecting all money functions.
Limited money supply flexibility.
MV = PQ.
How quickly money circulates.
Much circulates abroad.
Inflation erodes purchasing power.
Value sustained by collective trust.
Coins with face value exceeding metal content.
~2% inflation.
To provide financial stability.
Maximum employment and price stability.
Open-market operations, reserve requirements, discount rate.
Interest rate charged to banks by the Fed.
Federal funds rate is interbank lending; discount rate is Fed to banks.
Increasing money supply to stimulate the economy.
Decreasing money supply to fight inflation.
Insulates policy from political pressures.
12.
Currency in circulation plus bank reserves.
Money Supply = Monetary Base × Money Multiplier.
Buying longer-term securities to inject money.
Limits effectiveness of monetary policy.
Can create money and serves banks.
Assets and bank reserves increase.
During recessions.
During high inflation.
Increases money supply and lowers interest rates.
They are flexible and precise.
They move in opposite directions.
Increases in money supply lead to GDP growth.
Interest paid to banks on held reserves.
1/100th of a percentage point.
It serves as a benchmark for loan rates.
Target is the goal; effective is the actual rate.
Letting bonds expire to reduce money supply.
Makes borrowing more expensive.
Mortgage and loan rates.
Temporarily drains reserves.
Small changes have large effects.
Total Assets = Total Liabilities + Owner's Equity.
Vault cash and deposits at the Fed.
Simultaneous withdrawals by depositors.
Illiquidity is temporary; insolvency is permanent.
Guarantees deposits up to $250,000.
Leverages through multiple lending cycles.
Banks hold excess reserves and currency.
Owner's equity cushion against losses.
Minimum capital banks must hold.
Riskier behavior due to protection from risk.
Assets divided by capital.
It decreases.
Zero.
No, it creates corresponding liabilities.
Government securities and physical assets.
Banks were undercapitalized.
Sum of an infinite geometric series.
m = 1 ÷ (rr + er + cd).
It fell due to interest on excess reserves.
Deposit measures deposits; money measures total money supply.
Proportion of money held as cash.
Excess reserves and currency holdings reduce it.
It collapsed due to bank runs.
Increased saving can reduce total savings.
Sell $100,000 worth of bonds.
It approaches infinity.
It approaches 1.
Banks hold 100% reserves.
Excess money supply growth leads to rising prices.
Banks held reserves instead of lending.
Banks hoard reserves, reducing lending.
No leakages, all money deposited, banks lend all excess reserves.
Small changes have large effects.
Set to zero for all depository institutions.
Sends a powerful market signal.
Required are legal minimums; desired are based on bank strategy.
Higher requirements mean less lending and lower profits.
Ineffective monetary policy at near-zero rates.
Controls bank reserve preferences.
Offsetting money supply effects of reserve changes.
FDIC insurance reduced run incentives.
Creates credit and supports economic growth.
Creates systemic risk and inflation.
Changes them frequently to control credit.
Higher reserves mean safer banks but less activity.
Focused more on capital requirements.
Higher requirements lead to lower GDP.
For operational needs and precautionary buffers.
Banks hold all deposits as reserves.
Precautionary, profit, and risk aversion.
Emergency Economic Stabilization Act of 2008.
Banks won't lend below the IOER rate.
Fed can restrict money supply but can't force lending.
Mechanism linking Fed actions to bank loans.
Measures how quickly money circulates.
Fed communicates future policy intentions.
Fed bond purchases raise asset prices.
Charge banks for holding excess reserves.
Increased asset prices lead to higher spending.
Guideline for setting rates based on inflation and output gaps.
Prolonged low economic growth.
Rational for individual banks but harmful collectively.
Minimized before crises, accumulated during.
Rational for one bank but harmful for all.
Surged to $3.5+ trillion.
Secular stagnation and reduced lending capacity.
Buy bonds, lower IOER, and use forward guidance.