Banking panic occurs when depositors rush to take

Info icon This preview shows pages 27–29. Sign up to view the full content.

View Full Document Right Arrow Icon
Banking Panic – occurs when depositors rush to take their money out of banks due to fear that the bank will go bankrupt Also known as bank run Open- Market Purchase – occurs when the Federal Reserve buys back government bonds form the public in order to increase bank reserves and money supply Open-Market Sales – occur when the Federal Reserve sells government bonds in order to decrease bank reserves and the money supply Open-Market Operations – the purchase or sale of government securities in the secondary market Are the easiest way for the Federal Reserve to affect the bank reserves and money supply of the nation FDIC – organization responsible for Deposit Insurance To guarantee depositors’ that they would not lose their money To increase the public’s confidence in the banking system A decrease demand for foreign goods will lead to a decrease in the supply of U.S dollars The money supply is equal to the total amount of currency held by the public plus the total amount of bank deposits Quantity Theory of Money – proposes that there is a positive, direct relationship between the quantity of money in an economy and the price level, so; if the amount of money in the economy triples so will the prices, thus resulting in inflation Entitlement Programs – government programs that guarantee benefits to all applicants that meet the criteria Example : Social Security, Medicare, food stamps Prime Rate – is the lowest interest rate the banks charge large, credit-worthy commercial borrowers for short term loans A o Absolute advantage: A country's ability to produce something using fewer resources (more cheaply) than other market participants use. o Aggregate demand (AD): Total real GDP demanded at different price levels during a particular period of time, ceteris paribus. o Aggregate demand (AD) curve: A line showing the total quantity of output (real GDP) demanded at alternative price levels in a given time period, ceteris paribus. o Aggregate demand management: Government intervention through policy to influence the level of aggregate spending in the economy. o Aggregate demand-aggregate supply model (AS/AD): A macroeconomic framework for analyzing real gross domestic product (GDP) and the total amount spent for final goods and services (price level) in an economy, including consumption, investment, government spending, and net exports. o Aggregate expenditures: The total amount spent for final goods and services in an economy including consumption, investment, government spending, and net exports. o Aggregate expenditures model: A perspective in macroeconomics founded on the premise that the amount of production and employment depends directly on the level of total spending.
Image of page 27

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
o Aggregate supply (AS): The total real GDP producers are willing and able to supply at different price levels during a particular period of time, ceteris paribus.
Image of page 28
Image of page 29
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern