Exam 2 Study Guide - ECON 2301 Exam 2 Review Reserves- the...

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ECON 2301 Exam 2 Review Reserves - the deposits that a bank has at the Federal Reserve Bank plus its cash on hand Required Reserves - the amount of reserves a bank is required to hold in the vault: RR=dd X rrr Demand deposits - checking accounts Excess reserves - ER= actual reserves – required reserves: Reserve requirement ratio - rrr; fraction of demand deposits that must be held in the form of reserves Bernanke - Federal Reserve Chairman Money multiplier - multiple by which deposits can increase for every dollar increase in reserves: ∆M1= 1/rrr X ∆ER Open market operations - the purchase and sale by the Fed of government securities in the open market; a tool used to expand or contract the amount of reserves in the system and thus the money supply. If the Fed sells $X in securities, M1 falls by X If the Fed buys $X in securities, M1 increases by X Unemployment rate - the ratio of the number of people to the total number of people in the labor force Labor force - the number of unemployed plus the number of unemployed Discouraged worker - someone who drops out of the labor force because they cannot find work and have given up Frictional unemployment - portion of unemployment that is due to the normal working of the labor market; voluntary unemployment ex: temporarily unemployed while switching jobs Structural unemployment - Cyclical unemployment - Trough of business cycle - after a recession: the lowest point in the business cycle when
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This note was uploaded on 04/30/2008 for the course ECO 2302 taught by Professor Smith during the Spring '08 term at University of Texas at Dallas, Richardson.

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Exam 2 Study Guide - ECON 2301 Exam 2 Review Reserves- the...

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