Save
Busy. Please wait.
Log in with Clever
or

show password
Forgot Password?

Don't have an account?  Sign up 
Sign up using Clever
or

Username is available taken
show password

Your email address is only used to allow you to reset your password. See our Privacy Policy and Terms of Service.


Already a StudyStack user? Log In

Reset Password
Enter the associated with your account, and we'll email you a link to reset your password.

Question

How does Monetary Policy affect AD?
click to flip
focusNode
Didn't know it?
click below
 
Knew it?
click below
Don't know

Question

What is the goal of Monetary Policy?
Remaining cards (30)
Know
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.

  Normal Size     Small Size show me how

ECON 202

Macroeconomics Final Exam: Chapter 15 Monetary Policy

QuestionAnswer
How does Monetary Policy affect AD? By altering money supply and Interest rate
What is the goal of Monetary Policy? max. employment and price stability
What is warranted during a recessionary gap caused by negative demand shock expansionary monetary policy
What are possible types of expansionary Monetary Policy? Open market purchase, reduce discount rate, reduce required reserve rate
What is warranted during a inflationary gap caused by positive demand shock contractionary monetary policy
What are possible types of expansionary Monetary Policy? open market sale, increase discount rate, raise required reserve ratio
Effect on SRAS curve under negative supply shock: SRAS shift to left
What would cause SRAS to shift to the left? rising inflation, declining output, rising unemployment
What type of monetary policy will bring down inflation? Why? contractionary. Output is farther away from potential, push employment even higher
What type of monetary policy will bring down unemployment? Why? expansionary. price level is rising further
what type of recession was from 1981-1982 policy induced
How is required reserve ratio as a monetary policy tool? not very effective, can not be used on a daily basis
How is discount rate as a monetary policy tool? not used regularly, tied to decisions on open market operations
How is open market operations as a monetary policy tool? most important, most frequently used
In an open market operation, what are the Assets and Liabilities of the Fed's balance sheet? Assets- treasury securities, discount loans Liabilities- currency in circulation, bank reserves
In an open market operation, what are the Assets and Liabilities of a Commercial Bank's balance sheet? Assets- Reserves at Fed, Treasury Securities Liabilities- Deposits
What two markets are affected simultaneously in an open market operation? Treasury bill market, market for reserves at Fed.
How is the market for reserves at the fed effected by open market operations? banks borrow and lend among themselves to meet reserve needs
Federal Funds Rate (FFR): the interest rate that U.S. banks pay one another to borrow or loan money overnight
What happens during open market purchase? Fed Buying T-Bills
What happens during open market sale? Fed Selling T-Bills
What happens to the T-bills market during open market purchase? decrease demand for T-bills, increase price for T-bills, pushing Interest rate down
What happens in market for reserves during open market purchase? increases supply of reserves, push down FFR
What happens to the T-bills market during open market sale? increase supply of T-bills, Decrease price of T-bills, pushing interest rate up
What happens in market for reserves during open market sale? Decrease supply of Reserves, Push up FFR
Broader impacts of FFR (3) important benchmark for short-term interest rates, affects yield of Treasury Securities and the stock market, discount rate is usually set about 1% higher than FFR
What happens when FFR is cut down to 0 conventional monetary policy becomes ineffective. (this happened after great recession)
What are the 3 types of unconventional monetary policy? quantitative easing, forward guidance, negative interest rate
Quantitative Easing: a central bank purchases securities in an attempt to reduce interest rates, increase the supply of money and drive more lending to consumers and businesses.
Forward Guidance: the communication from a central bank about the state of the economy and the likely future course of monetary policy
Negative Interest Rate: used when strong signs of deflation, borrowers are credited interest instead of paying interest to lenders in a negative interest rate environment.
Created by: reganbobo15
Popular Economics sets

 

 



Voices

Use these flashcards to help memorize information. Look at the large card and try to recall what is on the other side. Then click the card to flip it. If you knew the answer, click the green Know box. Otherwise, click the red Don't know box.

When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again.

If you've accidentally put the card in the wrong box, just click on the card to take it out of the box.

You can also use your keyboard to move the cards as follows:

If you are logged in to your account, this website will remember which cards you know and don't know so that they are in the same box the next time you log in.

When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out.

To see how well you know the information, try the Quiz or Test activity.

Pass complete!
"Know" box contains:
Time elapsed:
Retries:
restart all cards