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7 Cards in this Set
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Targets for RGDP growth |
The underlying idea with this proposed target is that, if policymakers want inflation to average—say, 2 percent—and the rate of growth of real GDP to average—say, 3 percent, they should target nominal GDP growth of 5 percent. |
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Targets for unemployment |
the lowest sustainable rate of unemployment possible under existing institutions.
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Targets for inflation |
The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures |
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Identify and apply policy tools |
Open Market operations: Refers to buying and selling government securities in financial markets. Discount Rate: is the rate the fed charges other banks for loans. Required Reserve Ratio: is the fraction of reserves that banks must hold in reserve once you make a deposit. |
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Identify and apply fiscal policy tools |
Taxes and Spending : Fiscal Policy: Expansionary policy: Decreases taxes Increases spending. Contractionary policy: Increases Taxes Decrease spending. Automatic stabilizers: Economic policies and programs that are designed to offset fluctuations in a nation's economic activity without intervention by the government or policymakers. The best-known automatic stabilizers are corporate and personal taxes, and transfer systems such as unemployment insurance and welfare. Automatic stabilizers are so called because they act to stabilize economic cycles and are automatically triggered without explicit government intervention |
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Easy Money Policy |
monetary policy that increases the money supply usually by lowering interest rates. It occurs when a country's central bank decides to allow new cash flows into the banking system. |
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Tight Money Policy |
A course of action undertaken by the Federal Reserve to constrict spending in an economy that is seen to be growing too quickly, or to curb inflation when it is rising too fast. |
