Rohith Jayakumar
-The unemployment rate is the percentage of
those who would like to work who do not have
jobs.
- The unemployment rate is not a measure of
people who do not have jobs, it is a measure of
people who are in the work force who do not
have jobs.
- The Federal Reserve is the Central Bank of the
U.S.
-In the U.S economy money takes the form
of currency and various types of bank
deposits such as checking accounts.
- When banks loan out money, they increase
the money supply.
- Commodity money such as gold has
intrinsic value.
- The fed’s main method of controlling the
money supply is through buying and selling
government bonds. Selling bonds decreases
the money supply, buying bonds increases
the money supply.
central bank
an institution designed to oversee the banking system and regulate the quantity
of money in the economy
commodity
money
money that takes the form of a commodity with intrinsic value
currency
demand
deposits
discount
rate
federal
funds rate
Federal
Reserve
(Fed)
fiat money
the paper bills and coins in the hands of the public
balances in bank accounts that depositors can access on demand by writing a
check
the interest rate on the loans that the Fed makes to banks
the interest rate at which banks make overnight loans to one another
the central bank of the United States
money without intrinsic value that is used as money because of government
decree
fractionalreserve
banking
liquidity
a banking system in which banks hold only a fraction of deposits as reserves
the ease with which an asset can be converted into the economy’s medium of
exchange
medium of
exchange
an item that buyers give to sellers when they want to purchase goods and services
monetary
policy
the setting of the money supply by policymakers in the central bank
money
money
multiplier
the set of assets in an economy that people regularly use to buy goods and
services from other people
the amount of money the banking system generates with each dollar of reserves
money
the quantity of money available in the economy
supply
open-market
operations the purchase and sale of U.S. government bonds by the Fed
reserve ratio
the fraction of deposits that banks hold as reserves
reserve
requirements
regulations on the minimum amount of reserves that banks must
hold against deposits
reserves
deposits that banks have received but have not loaned out
store of
value
an item that people can use to transfer purchasing power from the
present to the future
unit of
account
the yardstick people use to post prices and record debts
-The overall level of prices in an economy
adjusts to bring money supply and money
demand into balance.
- The principle of monetary neutrality states
that changes in the quantity of money changes
nominal variables but not real variables.
- People do not necessarily lose money due to
inflation because as inflation increases
nominal incomes increases as well.
classical
dichotomy
Fisher effect
inflation tax
menu costs
the theoretical separation of nominal and real variables
the one-for-one adjustment of the nominal interest rate to the inflation rate
the revenue the government raises by creating money
the costs of changing prices
monetary
neutrality
the proposition that changes in the money supply do not affect real variables
nominal
variables
variables measured in monetary units
quantity equation
the equation M × V = P × Y relates the quantity of money, the
velocity of money, and the dollar value of the economy’s output of
goods and services
quantity theory of
money
a theory asserting that the quantity of money available
determines the price level and that the growth rate in the quantity
of money available determines the inflation rate
real variables
variables measured in physical units
shoeleather costs
the resources wasted when inflation encourages people to
reduce their money holdings
velocity of money
the rate at which money changes hands