terms - Terms Money- Anything that is generally accepted in...

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Terms Money- Anything that is generally accepted in payment for goods and services and in the repayment of debts. Federal Reserve Bank- An independent agency of the federal government and instrumental in determining monetary policy. Its main tools are alternating reserve requirements, and conducting open-market purchases and sales of governmental securities. Reserve Requirement- In banking, the faction of public deposits that a bank holds in reserves. Discount Rate- Interest rate charged on loans from the Federal Reserve Bank to its member banks. The rate is pegged to the fed funds rate. Open Market Operations- Federal Reserve purchases and sales of government securities on the open market. These activities are an important instrument of monetary policy because sales of government securities reduce the money supply, while purchases increase it. Federal Funds Rate- The interest rate that banks charge when they lend reserves to other banks for short periods of time; the Federal Reserve currently targets the fed funds rate and uses policy tools to achieve the stated target. Monetary Policy- Governmental policy concerned with the supply of money and credit in the economy and the rate of interest. This policy is designed to promote certain macroeconomic objectives, usually full employment, stable prices, economic growth, stable exchange rates, or balance of-payments equilibrium. Liquidity Trap- In Keynesian theory, the point in the economy when all economic agents desire to keep each additional dollar on hand. To them, the existing interest rate does not warrant the acquisition of bonds. The demand for money is thus perfectly elastic or horizontal, and monetary policy is completely ineffective in stimulating aggregate expenditures. Paradox of Thrift- Economic principle identified by Keynes, that an increase in the desire to save decreases output, even though investment may also increase. Monetarism-
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This note was uploaded on 10/19/2011 for the course ECON 104 taught by Professor Dolenc during the Spring '08 term at UMass (Amherst).

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terms - Terms Money- Anything that is generally accepted in...

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