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Chapter 17
econ
13
Economics
Undergraduate 2
04/26/2013

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Term
monetary policy
Definition
a central bank's changing of the money supply to influence interest rates and assist the economy in achieving price-level stability, full employment, and economic growth
Term
transactions demand
Definition
the amount of money people want to hold for use as a medium of exchange
Term
asset demand
Definition
the amount of money people want to hold as a store of value
Term
total demand for money
Definition
the sum of the transactions demand and asset demand for money
Term
money market
Definition
the market in which the demand for and the supply of money determine the interest rate (or series of interest rates) in the economy
Term
open-market operations
Definition
the buying and selling of U.S. government securities by the fed for purposes of carrying out monetary policy
Term
discount rate
Definition
the interest rate the federal reserve banks charge on the loans they make to commercial banks and thrifts
Term
term auction facility
Definition
a monetary policy tool used by the fed to expand reserves through auctioning off loans (reserves) anonymously to commercial banks
Term
easy money policy
Definition
fed actions designed to increase the money supply, lower interest rates, and expand real GDP
Term
tight money policy
Definition
fed actions to reduce (or restrict) the growth of the nation's money supply, increase interest rates, and restrain inflation
Term
federal funds rate
Definition
the interest rate banks and thrifts charge one another on overnight loans made out of their excess reserves
Term
prime interest rate
Definition
the benchmark interest rate that banks and thrifts use as a reference point for a wide range of loans to businesses and individuals
Term
cyclical asymmetry
Definition
the potential problem of monetary policy successfully controlling inflation during the expansionary phase of the business cycle but failing to expand spending and real GDP during the recessionary phase of the cycle
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