Suppose you are told that "money is neutral". Ceteris paribus, it follows that, in the
long run, if the velocity of
money is constant and if the money supply grows more slowly than the rate of growth
of real GDP, then one would
most likely expect _______.
A. an increase in the real interest rate
B. an increase the price level - i.e. inflation
C. a decrease in the real interest rate
D. a decrease in the price level - i.e. deflation
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D. a decrease in the price level - i.e. deflation
Reserve Requirements
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, •Through the money multiplier, from the previous lecture:
(ΔReserves/Reserve Ratio), those new loans will become new money.
When the Fed decreased the reserve requirement to zero, theoretically, the
money supply could go to infinity.
Money Supply
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the quantity of money available in the economy. The Fed controls the
money supply and thus influences the price level (i.e. inflation) and interest
rates. As the Fed increases the money supply, it puts upward pressure on
prices and downward pressure on nominal interest rates
True or False: The M1 measure of the money supply would typically be expected to
be larger than M2.
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False
If there is inflation or deflation, and the real interest rate does not change, then
economist typically refer to this
situation as _______.
A. hyperinflation
B. hyperdeflation
C. the Fisher Effect
D. the Bernoulli Effect
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, C. the Fisher Effect
Doves
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emphasize the Fed's employment mandate; politically they tend to be
Democrats, though, again, that's not as firm a distinction as it once was.
Balance sheet
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A financial statement that sums up a firm's current financial situation. It
shows stockholders equity, or "capital", which equals assets minus liabilities.
stepping on the gas
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refers to when the Fed increases the money supply, it puts upward pressure
on prices and downward pressure on nominal interest rates. this is known as
an expansionary policy.
Dual Mandate
long run, if the velocity of
money is constant and if the money supply grows more slowly than the rate of growth
of real GDP, then one would
most likely expect _______.
A. an increase in the real interest rate
B. an increase the price level - i.e. inflation
C. a decrease in the real interest rate
D. a decrease in the price level - i.e. deflation
Give this one a try later!
D. a decrease in the price level - i.e. deflation
Reserve Requirements
Give this one a try later!
, •Through the money multiplier, from the previous lecture:
(ΔReserves/Reserve Ratio), those new loans will become new money.
When the Fed decreased the reserve requirement to zero, theoretically, the
money supply could go to infinity.
Money Supply
Give this one a try later!
the quantity of money available in the economy. The Fed controls the
money supply and thus influences the price level (i.e. inflation) and interest
rates. As the Fed increases the money supply, it puts upward pressure on
prices and downward pressure on nominal interest rates
True or False: The M1 measure of the money supply would typically be expected to
be larger than M2.
Give this one a try later!
False
If there is inflation or deflation, and the real interest rate does not change, then
economist typically refer to this
situation as _______.
A. hyperinflation
B. hyperdeflation
C. the Fisher Effect
D. the Bernoulli Effect
Give this one a try later!
, C. the Fisher Effect
Doves
Give this one a try later!
emphasize the Fed's employment mandate; politically they tend to be
Democrats, though, again, that's not as firm a distinction as it once was.
Balance sheet
Give this one a try later!
A financial statement that sums up a firm's current financial situation. It
shows stockholders equity, or "capital", which equals assets minus liabilities.
stepping on the gas
Give this one a try later!
refers to when the Fed increases the money supply, it puts upward pressure
on prices and downward pressure on nominal interest rates. this is known as
an expansionary policy.
Dual Mandate
