Term
| Double coincidence of wants |
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Definition
Two traders directly exchanging products
As variety of goods increases, exchange rates can change between diff. goods so becomes less and less rational |
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Definition
| People tend to trade away inferior money and hoard the best |
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Term
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Definition
Difference between face value of money and cost of supplying it
"Profit" from issuing money |
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Term
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Definition
Money that is money because the gov says so
Backed by nothing |
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Term
| Federal Reserve Banks (Fed) |
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Definition
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Term
| Federal Open Market Committee |
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Definition
| Makes decisions on buying and selling gov. securities |
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Term
| Interest-rate ceilings on deposits |
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Definition
| led to banks losing deposits whenever market rates went above the ceiling rates |
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Term
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Definition
| Mortgage in which the borrower has a poor credit rating |
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Term
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Definition
| coins and currency held by the nonbank public, checkable deposits, and traveler's checks |
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Term
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Definition
cash in bank's vault
Yields no interest |
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Term
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Definition
Opposite of reserve rate ratio (so 1/r)
If banks allow some of their excess reserves to remain in the vault-the simple money multiplier will exceed the actual money multiplier |
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Term
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Definition
| Interest rate the Fed charges banks that borrow reserves |
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Term
| Fed's purchase of U.S. gov. securities constitutes... |
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Definition
| an expansionary policy because it raises amount of total reserves in banking system |
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Term
| In deciding how much money to hold, you should compare the... |
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Definition
| advantage of liquidity with the disadvantage of losing interest |
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Term
| As price level rises, money___, causing interest rates to ____ and investment to ____ |
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Definition
money demand rises causing
interest rates to rise
and investment spending to fall |
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Term
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Definition
| Real GPD=money in circulation x velocity |
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Term
| Economic theory suggests that |
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Definition
| rapid growth in money supply leads to rapid growth in the price level |
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Term
| Why self-correction works to close a contractionary gap |
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Definition
| Labor surplus causes money wages to fall |
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Term
| Economists of rational expectations school believe expansionary monetary policy is fully effective only if |
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Definition
| The policy is totally unexpected |
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Term
| If resource owners anticipated a monetary growth rate higher than actual |
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Definition
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Term
| Time inconsistency problem |
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Definition
| When policy makers have an incentive to announce one policy to influence expectations but then pursue a different policy once those expectations have been formed and acted on |
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Term
| Countries with lowest interest rate |
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Definition
| have least independent central banks |
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Term
| Rationale for a fixed-growth-rate monetary policy |
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Definition
| Not possible to certainly determine what's happening in the economy, so easy to make mistakes w/active policy |
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Term
| Fact: Gov policy that results in low inflation is generally the optimal long-run policy. |
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Definition
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