University:
Central Michigan University
Course:
ECO 306 | Money and Banking
Academic year:

2022
Views:

299

Pages:

2
Author:

vandalskovr8

Monetary Policy Study Guide Key Concepts 1. What are the three functions of money? 2. Explain why a small increase in bank deposits cause a larger increase in the money supply and identify the equation for the Money Multiplier? The money becomes someone else's income, Presene Requirein't 3. EXPLAIN the three tools of monetary policy and identify how each increase or decreases the Ms. a. Reserve Requirement- amount of money banks must hold in rese nues b. The Discount Rate the rate at which the FED loans money to banks c. Open Market Operations- The buying and selling of bonds Isccunatics R 4. In three graphs, show the effect of an increase in Money Supply Money Market Investment Market IR B Dm M Inuistumk AD/AS PL AS AD AD GDP M 5. In three graphs, show the effect of a decrease in Money Supply Money Market Investment Market IR IRB LRAS PL AD/AS AS Dm Sm Quantic M Investonk LRAS AD OPP Fiscal Policy What is it? Actions by Congress to stabilize the economy, Who does it? Congress Dlaxing Specific Tools Spending Problems with Policy Crowding Out Timing Politically matawaled effect 4Nct Recessionary Gap LRAS PL AS AD Expansionary Policies GDPR Process= Taxes Inflationary Gap Contractionary Policies Process GS 1 Taxes Monetary Policy When the FED adjusts the money supply to achine three macro goals THE FED Reserve Requiremat Discount Rak Open Market Operations Crowding gut Non-elected officialmday ③ Consume is behave issationell Recessionary Gap Process= Rersone Requirement Discourt Rule Buy Bonds Inflationary Gap Process Rescrie Requiremt Discount Rale ③ Sell Bonds

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