ECON211Exam3StudyGuide - ECON 211 Exam 3 Study Guide...

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ECON 211 Exam 3 Study GuideMonetary System & Monetary PolicyThe Federal Reserve (the Fed)The central bank of the United StatesCentral bankInstitution designed to-Oversee the banking system-Regulate the quantity of money in the economyBoard of governors7 members, 14-year termsAppointed by the president and confirmed by the SenateThe chairmanDirects the Fed staffPresides over board meetingsTestifies regularly about Fed policy in front of congressional committees.Appointed by the president (4-year term)Understand how the Federal Reserve changes the federal funds interest rateThe federal funds rateInterest rate at which banks make overnight loans to one anotherLender - has excess reservesBorrower - needs reservesA change in federal funds rateChanges other interest ratesThe Fed: target the federal funds rateOpen-market operationsThe Fed buys bondsDecrease in the federal funds rateIncrease in money supplyThe Fed sells bondsIncrease in the federal funds rateDecrease in money supplyUnderstand the concept and measurement of moneyMoney - a liquid asset (easily exchanged for goods & services)Store of valueUnit of account0Measuring the money supplyM1: cash, currency, demand deposits (checking accounts) - these are narrowM2: Everything in M1 + savings deposits, small time deposits + money market mutual\funds + a few minor categoriesUnderstand how changing the federal funds rate also changes the money supplyBe able to analyze the short-run and long-run impact of monetary policy on output, employment andpricesDifference between the short-run impact of monetary policy and long-run money neutralityEconomic outlook and how Fed formulates monetary policy decision
APLIAWhen the Fed conducts open-market purchases,It buy Treasury securities which increases the money supply

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Term
Spring
Professor
RICHARDJ.COE
Tags
Federal Reserve The Fed, Monetary Policy, Capital in the 21st Century, Federal Reserve System, federal funds rate, Federal Reserve Banks

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