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44 Cards in this Set
- Front
- Back
Econiomics is:
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The study of the material reproduction of society that examines the forces and relations of production in their institutional framework.
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The cost of changing something is always measured in terms of what you gave up, this is referring to:
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the Opportunity Cost
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All man made aids to production are considered
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capital
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This occurs when we operate inside the PPC due to failure to maintain full employment
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Demand Side Waste
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Occurs when we operate inside the PPC due to underemployment.
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Supply Side Waste
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Formula for Change in Money Supply (or how much the money supply will expand)
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1/RR x Change in Excess Revenue
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Money Multiplier Formula
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1/RR
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Excess Reserves =
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Actual Reserves - Required Reserves
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T/F - State chartered banks are required to join the Federal Reserve?
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False, only federally chartered banks are required to join, but state chartered banks can join if they wish.
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(3) Benefits of joining the Federal Reserve:
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1. Image of soundness
2. Check clearing privileges 3. Borrowing at the discount window (which is on an overnight basis) |
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(3) BASIC Requirements of joining the Federal Reserve:
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1. Must meet the reserve requirement at all times
2. Must purchase stock in the Fed 3. Must meet all other regulations, requirements and guidelines. |
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The Federal Reserve is a _______________ institution.
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Quasi-Public, meaning that it is public and not for profit but also privately owned by member banks.
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The Federal Reserve was crated through what means?
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An act of Congress, "The Federal Reserve Act of 1913"
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The Fed has how many district banks?
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12
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The Federal Reserve Board (FRB) has how many members?
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7
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Members of the FRB can server for how many years in one term?
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14 years
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The chair of the FRB serves how many years in a term?
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4, not in conjunction with the president.
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The former chair of the FRB was:
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Alan Greenspan
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Current chair of the FRB
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Ben Bernanke
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How many members serve on the Federal Open Market Committee?
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12 (7 from FRB + 5 district bank presidents who serve in rotations)
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What are the (3) tools of monetary policy?
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1. Discount Rate
2. Reserve Requirement 3. Open Market Operations |
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The discount rate is set by who?
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The board of directors of the district banks, subject to review and determination of the FRB.
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Discount Rate is:
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where banks borrow at the 'discount window' on an overnight basis.
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If the discount rate increases, the change in the money supply will be:
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A decrease in the MS.
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If the discount rate decreases, the change in borrowing amounts will:
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Borrowing will increase.
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% of demand deposits banks are required to keep on reserve either in the vault or at the Fed is the:
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Reserve Requirement
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The reserve requirement is set by who?
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The FRB.
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What is the most powerful tool in monetary policy???
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Reserve Requirement
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What is the least frequently tool used in monetary policy???
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Reserve Requirement
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What is the most frequently tool used in monetary policy???
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Open Market Operations
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The buying and selling of government (treasury) bonds is:
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Open Market Operations
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Money that has no value as a commodity is:
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Fiat Money
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The ___________ theory would support:
1. Increases to Government Spending 2. Decreases in Taxes 3. Increasing the Money Supply |
Keynesian
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When the interest rate is high, people expect it to fall, therefore they:
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Hold small cash balances and high amounts of bonds.
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When the interest rate is low, people expect it to rise, therefore they:
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Hold large amounts of cash balances and low amounts of bonds.
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3 Contractionary monetary policy tools:
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1. Increase Reserve Requirement
2. Increase Discount Rate 3. Sell Bonds in the Open Market |
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An excess supply of money = ____________ demand bonds
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excess
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Does expansionary monetary policy reduce unemployment?
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Yes
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Government Spending and Taxes = ___________ Policy
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Fiscal
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Investment Spending = _____________ Policy
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Monetary Policy
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This refers to the existence of simultaneous inflation and unemployment.
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Stagflation
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Short Run Aggregate Supply Model is:
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Upward Sloping (output and prices adjust)
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Long Run Aggregate Supply Model is:
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a Vertical Line (only prices adjust)
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What is the liquidity trap?
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It explains why monetary policy may not result in an expansion in output when used to decrease a recessionary gap, the demand for money may be perfectly elastic at low interest rates.
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