ECON LESSON #12 – Flashcards

________ argue that fiscal policy is weak due to the crowding-out effect

According to the Monetarist theory, _______ is a critical casual force that determines the nominal GDP

A net outflow of dollars resulting from a trade deficit is often returned to the United States for purchase of Treasury bonds that pay a market interest rate with ______ risk

In the equation of exchange, MxV=PxQ, the V represents _______

One reason that monetary policy is believed to be very significant is because of its speed and flexibility in implementation

The basic concepts for the Fed to implement an "tight money" policy would include

The Fed regulates the money supply using _______ basic tools of operation

A tight money policy (high interest rates) will _______ the value of the dollar, reduce exports, slow the American economy, but will attract a return of American dollars spent for imports

The effectiveness of changes in the Discount Rate depends on commercial banks' changing their _______ practices to impact the money supply

The quantity theory of money assumes there is a _________ relationship between the quantity of money and the price level

The Fed's most powerful tool is the _________

________ would argue that the unstable nature of V can cause a significant impact on GDP

The open market operations of the FOMC are the ______ tool of the Fed

Raising the reserve ratio _______ the ability of banks to create money (make loans) and decreases a bank's ability to make a profit

_______ argue that requiring the Fed to operate with a "monetary rule" for money growth at the same rate as increases in real GDP would be very wise

Only funds inside a bank's vault are counted as part of the M1 money supply

With the complexity of economic activity the _______ of money is not erectly controlled by the Fed

In an inflation the money supply can be _______ by the Fed selling securities

The _______ school is most widely held today, but is continuing to change with the global economy

The money market determines the interest rate which is a critical factor determining the amount of ________ (capital spending) and, therefore, the amount of growth in the economy

The _________ is the buying and selling of Treasury securities to influence the nation's money supply

The Fed's three basic tools operate by adjusting interest rates (rental price of money) and the _______ of money

The implementation of monetary policy can be complex because of the international position of ________

Funds transferred from the Fed to pay for securities purchased from a bank (or the public) are then held by the bank who can then extend more loans and this increases the money supply by a multiple of the original amount

According to ________, a "monetary rule" would be very constraining for the Fed and would only increases business cycles

In the equation of exchange, MxV=PxQ, the P represents

In contrast to the Monetarists, the Keynesians assume that the velocity of money varies directly with_______

The ________ is too powerful to be changed very often because a small change is magnified throughout the banking system

In a recession the money supply can be ________ by the Fed buying securities

The Fed sets the percentage of depositor funds which must be retained by the bank in "legal reserves" (cash in the vault or ________)

When the Fed _______ reserve requirements, banks are allowed to hold back less money on customer deposits and can make more loans