Term
| How does the Fed Influence the quantity of money? |
|
Definition
| Through open market operations to determine the monetary base and federal funds rate |
|
|
Term
| Banks create ________ and the fed _________ |
|
Definition
| Money, influences the quantity |
|
|
Term
|
Definition
| the amount of money that households and firms chose to hold |
|
|
Term
| What is the benefit of holding money? |
|
Definition
| The ability to make payments |
|
|
Term
| What is the opportunity cost of holding money? |
|
Definition
The nominal interest rate
(real interest rate & inflation) |
|
|
Term
| Three main influences in the demand for money |
|
Definition
- price level
- Real Gdp
- Financial Technology |
|
|
Term
As the real GDP increases demand _______
What else ____'s |
|
Definition
Increases
Expenditures & income
|
|
|
Term
| The number of dollars we need to make payments is proportional to the |
|
Definition
|
|
Term
- Checking deposits, automatic transfers between checking and savings accounts, debit cards demand more/less money?
|
|
Definition
|
|
Term
| Credit cards demand more/less money? |
|
Definition
|
|
Term
|
Definition
| $ amount stated on the bond |
|
|
Term
|
Definition
|
|
Term
|
Definition
| Price must pay to buy or price must pay to sell |
|
|
Term
|
Definition
[Face Value]-[Market Price]
[Market Price] |
|
|
Term
| If the price of the bond falls the interest rate ________? |
|
Definition
|
|
Term
|
Definition
| Relationship between the quantity of money supplied and the nominal interest rate. |
|
|
Term
| The supply of money is ______ in the short run and __________ in the long run |
|
Definition
|
|
Term
|
Definition
the quantity of goods and services that a unit of money will buy
1/P |
|
|
Term
| In the long run a given percentage change in the quantity of money brings an ______percent change in price level |
|
Definition
|
|
Term
In the long run
Real GDP = Potential GDP because it is |
|
Definition
| independant of the quantity of money |
|
|
Term
| In the long run the velocity of circulation is |
|
Definition
relatively stable
(does not change when quantity of money changes)
|
|
|
Term
|
Definition
| [Money growth rate] + [Velocity Growth Rate] - [Real GDP Growth Rate] |
|
|
Term
|
Definition
| The number of timesina year that the average dollar of money gets used to buy final goods and services |
|
|
Term
Equation of Exchange
|
Velocity of circulation
|
V
|
|
Quantity of Money
|
M
|
|
Price Level
|
P
|
|
Real GDP
|
Y
|
|
|
Definition
|
|
Term
|
Definition
tax costs
shoe leather costs
confusion costs
uncertainty costs |
|
|
Term
|
Definition
Increase in velocity of circulation of money
increases the amount of running around that people do to try to avoid incurring losses from the falling of money |
|
|
Term
|
Definition
High inflation brings uncertainty about the long term inflation
people misallocate resources (search for ways to avoid losses that inflation inflicts) |
|
|
Term
|
Definition
inflation taxis the economic disadvantage for holding
-only true for money you hold |
|
|
Term
| If return on a stock is 4% and inflation is 4% then |
|
Definition
|
|
Term
Government Revenue (inflation)
(capital gains tax) |
|
Definition
inflation increases money
if return on a stock is 4% and the inflation is 4% then the return is 0% to the investory but the govt gets tax revenue from the 4% (capital Gains tax) |
|
|
