Economics Money
Terms
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- functions of money
- unit of account, storage of value, means of exchange
- money supply
- all the money avilable in the US economy
- M1
- money that people can gain access to easily and immediatley to to pay for goods and services. most liquid money: cash, checks, debit card, traveller's checks
- multiplier effect
- explains how money is created. loans create money
- demand deposit
- the money in checking accounts, M1 money
- liquidity
- the ability to be used as, or directly converted to, cash
- federal reserve system created to...
- encourage business expanision, restore confindence in banking
- Jobs of the FED
- monetary policy, clear checks, regulate banks, issue currency, bank for federal government, lender of last resort, confidence in our currency and banking system
- Alan Greenspan
- Chairman of the FED
- monetary policy
- how the FED manipulates the money supply in order to regulate the economy
- discount rate
- rate the Federal Reserve charges for loans to commercial banks
- open market operations
- the buying and selling of government securities to alter the supply of money
- reserve requirement
- percent of money that banks are required to keep by the FED
- interest rates
- the percentage of price paid for the use of borrowed money or money earned by deposited funds
- fiscal policy
- the use of government spending and revenue collection to influence the economy
- expanionist policy
- policies that encourage economic growth like spending
- contractionary policy
- fiscal policies, like lower spending and higher taxes, that reduce economic growth
- Laffer Curve
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1. lowering taxes increases output because people have incentive to work more and because it puts more $ in the economy
2.government can lower taxes and may actually move towards a surplus by collecting more in revenue
(sideways parabola)