Money & Banking final

26 cards

Study set of final for ECON 3250

Created Dec 8, 2011
by cddobbins

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	Side A	Side B
1	What economic statistic is used to measure inflation?	CPI
2	What is the most recent method used by the Fed to increase the money supply?	Term Auction Facility
3	What determines exchange rates in the short-run?	Supply & demand
4	What is the overnight rate that is charged between banks?	Fed Funds Rate
5	Over the last two decades, the interest rates chosen by the Fed have usually been close to...	The Taylor Rule
6	A situation in which output is below potential at a nominal interest rate of zero, in which...	Liquidity trap
7	The monetary policy that a central bank uses when it allows output to stay above potential...	Expansionary fiscal policy
8	What is the current fed funds target?	0.25%
9	What is the short-run (year-to-year) fluctuations in an economy's output and unemployment called?	Business cycle
10	What is the monetary policy of reducing inflation by temporarily raising interest rates called?	Disinflation
11	What has the level of potential output been since the 1990s?	3 - 4%
12	What are four possible expenditure shocks?	Increase in government spending, tax cuts, new technology, increase in consumer confidence...
13	How might the Fed respond to an increase in output?	Increase interest rates
14	Explain what happens when output is above potential and interest rates are held constant?	A rise in output pushes inflation above expected inflation
15	What are two possible adverse supply shocks?	Rise in oil prices and an increase in wages
16	What is the implicit rate of inflation that the Fed seems to be targeting?	1 - 2%
17	What was the Subprime Mortgage Crisis? When did it occur?	This crisis occurred from 2007-2009 when the US experienced a 55% fall in the stock market,...
18	What at four possible reasons for the Subprime Mortgage Crisis?	1) The Fed not increasing rates enough to burst asset bubble2) The banks for giving loans to...
19	What monetary policy action was taken to prevent what might have become the next depression?	The Fed decreasing the target for its federal funds rate between 0 - 0.25%
20	What fiscal policy was used?	TARP committed $700 billion of government funding to failing financial institutions. The treasury...
21	What is the proportion of money not recycled back into the system called?	Leakage
22	If the Fed decreases the reserve requirement, does the money supply increase or decrease?	Increases
23	How does the Fed increase the money supply?	1) Buying treasury bonds in the open market2) Decreasing the discount rate3) Decreasing the...
24	What are the three costs of inflation?	1) Shoe leather costs - money loses value quicker than you can spend it2) Income inequality...
25	Explain the time lags in monetary vs. fiscal policy	Monetary policy has an immediate effect. It affects output in one year; output affects inflation...
26	Name at least two arguments that someone (like Ron Paul) would make against central bank independence?	1) In a democracy, elected officials should make economic decisions2)The fear that the priorities...