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Monetary Theory Final

Terms in this set (151)

The upward and downward movement of aggregate output produced in the economy is
business cycle
The three players in the money supply process include
banks, depositors, central bank
Prior to almost all recessions since 1950, there has been a drop in
growth rate of the money stock
________ theory relates the quantity of money and monetary policy to changes in aggregate
economic activity and inflation.
monetary
A continuing increase in the growth of the money supply is likely followed by
an increase in the price level (inflation)
Complete Milton Friedman's famous state
ment, "Inflation is always and everywhere a
________ phenomenon."
monetary
The major criticism of the view that expectations are formed adaptively is that
this view ignores that people use more in
formation than just past data to form their
expectations.
The most comprehensive measure of aggregate output is
gross domestic product (GDP)
Assume that you borrow $4000 at 10% annual interest to finance a new business project. For this loan to be profitable, the minimum amount this project must generate in annual earnings is
$401
Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them.
Assets; liabilities
Federal funds are
loans made by banks to each other
Mortgage-backed securities are similar to ________ but the interest and principal payments are backed by the individual who mortgages within the security.
bonds
Based on our analyses, the federal funds rate
always between the interest rate on reserves and the discount rate
________ is the narrowest monetary aggregate that the Fed reports.
M1
The present value of an expected future payment ________ as the interest rate increases.
falls
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