Term
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Definition
| What is the equation for Okun's law? |
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Term
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Definition
| According to Taylor rule, the Fed should ___ interest rates when inflation rises above its target rate, and ___ interest rates when output falls below its potential. |
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Term
| Long-run Money Neutrality |
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Definition
| The principal that monetary policy can NOT permanently impact real variable is called ____. |
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Term
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Definition
| Suppose the economy is producing at the potential level of output. Further assume that there is a substantial fall in stock prices. Everything else held constant, the fall of stock prices will cause real aggregate output to ___ in the short-run, and the inflation rate will ___ in the short-run. |
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Term
CANNOT EFFECTIVELY
MONETARY POLICY |
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Definition
| If output is below potential output at a nominal interest rate of zero, a central bank ___ conduct ____ |
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Term
inflation forecasts
money growth |
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Definition
The two pillars of the European Central Bank's policy are
____ and ____ |
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Term
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Definition
| Suppose a legislative mandate takes effect that requires at least 10% of the gasoline sold in the United States be mixed with ethanol made from corn. Further assume that corn is a major ingredient in many types of food based intermediate goods. Everything else held constant, this would cause an ___ supply shock, and the inflation rate would ___. |
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Term
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Definition
| Using the notation on the text, the after-tax real interest rate is written as: _____ |
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Term
| policymakers are tempted to pursue discretionary policy that is more expansionary in the short run. |
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Definition
| Monetary Policy is considered time-inconsistent because _______________________ |
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Term
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Definition
| Under a gold standard, the main determinant for money growth was _______ |
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Term
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Definition
| ___ is the provision that the Fed give clear and detailed information about monetary policy. |
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Term
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Definition
| If the economy is in recession, then the output gap is ____ |
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Term
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Definition
| Suppose that a country's central bank targets the level of the money supply. Further assume that the country enters a severe recession. In the context of the liquidity preference model and everything else held constant, this will cause money demand to ____ and nominal interest rates will ___ |
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Term
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Definition
| The decision by inflation targeters to choose inflation targets __ zero reflects the concern on the monetary policymakers that particularly __ inflation can have substantial negative effects on real economic activity. |
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Term
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Definition
| Everything else held constant, if bond traders feel that an economy is sliding into recession, then bond prices will ___ in anticipation of a federal rate ___. |
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Term
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Definition
| Suppose the US economy is producing at the potential level of output. Further assume that the US Congress passes and the President signs a bill that significantly increases government spending. Everything else held constant, if the federal reserve is following accomodative policy, then the real interest rate ___ be changed, and the inflation rate will ___. |
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Term
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Definition
| Assuming there are no empty slots on the Board of Governers the FOMC has __ members: __ chosen by the Board of Governors, and the presidents of __ Federal Reserve Banks |
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Term
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Definition
| When the Fed raises federal funds rates by 2% for every 1% increase in the inflation rate, this is an example of: ____ |
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Term
Legislative
Implementation |
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Definition
| Of the 5 time lags that prevent economic policy from returning real aggregate output to the potential leval instantaneously, two do not slow down the effectiveness of moneyary policy significantly, the ___ and the __ lags. |
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Term
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Definition
| Everything else held constant, an increase in the time deposit ratio will result in ____ in the M1 Money multiplier and ___ in the M2 Money Multiplier |
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Term
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Definition
| Suppose on any given ay, there is an ecess demand of reserves in the federal funds market. If the Federal Reserve wishes to keep the feeral funds rate at its current level, then the appropriate action for the Federal Reserve to take is a ___ open market ___, everything else held constant. |
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Term
| proportionally with checkable deposits. |
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Definition
| An assumption in the model of the money supply is that the desired levels of currency and excess reserves grow _________ |
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Term
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Definition
| The mandate for the monetary policy goals that has been given to the Federal Reserve System is an example of a ____ mandate. |
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Term
| securities and discount loans |
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Definition
| The two most important categories of assets on the Fed's balance sheet are ___ and ___ because they earn interest. |
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Term
REMAINS UNCHANGED
REMAINS UNCHANGED |
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Definition
| Suppose your payroll check is directly deposited into your checking account. Everything else held constant, total reserves in the banking system ______ and the monetary base ______. |
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Term
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Definition
| In the market for reserves, when the federal funds interest rate is below the discount rate, the supply curve of reserve is ___ |
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Term
| DYNAMIC OPEN MARKET OPERATIONS |
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Definition
| When th European System of Central Banks uses long-term refinancing operations, it is similar to the Federal Reserve using ______ |
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Term
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Definition
| Everything else held constant, an increase in the excess reserve ratio will mean a __ in the M1 Money Multiplier and a ___ in the M2 Money Multiplier. |
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Term
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Definition
| Suppose, while cleaning out its closets, a worker at the Federal Reserve bank branch in Memphis discovers a painting of Elvis that used to grace the walls of the conference room. Suppose further that, at a public auction, the bank sells the painting for $19.95. This sale will cause a ____ in the monetary base, everything else held constant. |
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Term
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Definition
| The time-inconsistency problem with monetary policy tells us that, if policy makers use discretionary policy, there is a higher probability that the ____ will be higher, compared to policy makers following a behavior rule. |
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Term
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Definition
| Everything else held constant, an increase in the interest rate paid on checkable deposits will cause ___ in the amount of checkable deposits held relative to curency hldings and ___ in the currency ratio. |
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Term
| The Implicit Nominal Anchor |
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Definition
| The monetary policy strategy that suffers a lack of transparency is ____ |
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Term
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Definition
| Everything else held constant, an increase in wealth will cause the holding of checkable deposits to the holding of currency to ___ and the currency ratio to ___ |
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Term
| one full nonrenewable fourteen year term, plus part of another term |
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Definition
| Each governor on the Board of Governors can serve _______ plus ____ |
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Term
| more important than the fed. |
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Definition
| Regarding central bank independence, the European Central Bank is ______ |
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Term
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Definition
| The ____ created the Board of Governors of the Federal Reserve System. |
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Term
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Definition
| In the market of reserves, when the federal funds rate is above the interest rate paid on excess reserves, the demand curve for reserves is ____ |
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Term
| a matched sale-purchase transaction. |
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Definition
| The fed can offset the effects of an increase in float by engaging in _____ |
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Term
| a central bank was needed to prevent future panics. |
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Definition
| The financial bank panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that ______ |
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Term
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Definition
| Each Fed bank president attends FOMC meetings; although only ___ Fed bank presidents vote on policy, all __ provide input. |
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Term
| the money multiplier falls |
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Definition
| During the end of the year holiday season, depositors typically withdraw more currency from their accounts. This implies that _____ during the end of the year Holiday Season |
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Term
Decreases
Remain Unchanged |
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Definition
| When the Federal Reserve calls in a discount loan from a bank, the monetary base ___ and reserves ____ |
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Term
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Definition
| According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation ___ the Fed's inflation target, or when real GDP ____ the Fed's output target. |
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Term
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Definition
| If Treasury deposits at the Fed are predicted to decrease, the manager of the trading desk at the New York Fed bank will likely conduct ___ open market operations to ___ reserves |
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Term
| Regulatory Functions or Decentralized Structure |
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Definition
| What makes the Federal Reserve so unique compare to other central banks around the world is its _____ |
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Term
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Definition
| A decrease in the interest rate paid on checkable deposits, everything else held constant, will cause a ____ in the currency ratio, and a ___ in the money supply |
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Term
| the MONEY MULTIPLIER FALLS |
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Definition
| During the end of the year holiday season, depositors typically withdraw more currency from their accounts. This implies that _____ during the end of the year holiday season. |
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Term
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Definition
| If a member of a non-bank public purchases a government bond from the Feeral Rserve with currency, the monetary base will ___, but reserves will ___ |
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Term
can be exercised
no required reserves |
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Definition
| In the channel-corridor system, monetary control _______ with _____ |
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Term
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Definition
If the desired intermediate target is an interest rate, the preferred policy instrument would be ____
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Term
MONETARY AGGREGATES
PROCYCLICAL |
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Definition
| In practice, the Fed's policy of targeting _____ in the 1960s proved to be ____ destabilizing the economy |
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Term
| not renewed because Congress failed to renew the charter by a single vote. |
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Definition
| The bank charter for the First Bank of the United States was _________ |
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Term
| The Office of the Comptroller of the Currency (OCC) |
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Definition
| The National Bank Act of 1863 created which financial regulatory agency? |
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Term
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Definition
| The increase in the availability of ATMs has caused the cost of acquiring currency to ___, which will cause the currency ratio to ___, everything else held constant. |
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Term
| have a lender of last resort |
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Definition
| The primary reason for the creation of the Federal Reserve System was the desire to ______ |
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Term
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Definition
| The amount of borrowed reserve is ___ related to the discount rate, and is ___ related to the market interest raet. |
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Term
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Definition
| An increase in ___ leads to an equal, though temporary, ___ in the monetary base. |
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Term
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Definition
| The Monetary Policy Strategy that provides the least acountability is _____ |
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Term
| Banks, Depositors, the Central Bank, and borrowers |
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Definition
The four players in the money supply process include:
__ __ __ and __ |
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Term
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Definition
| Suppose the Bank of China permanently decreases its purchases of US Government Bonds and, instead, holds more dollars on deposit at the Federal Reserve. Everything else held constant, an open market ___ would be the appropriate monetary action for the fed to take to offset the expected ___ in the monetary base in the United States. |
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