Card Set Information
Dr Robinson's class
Almost all the money in the world today is _____ money
Money whose value comes from the substance from which it is made
Prior to 1900's what did most countries use as their money?
Gold and silver.
Functions of money
Medium of exchangeUnit of accountStore of value
An economic system without money is called?
An increase in the money supply should lower interest rates. T/F
An increase in the money supply should lower inflation T/F?
The central bank increase the money supply by _______ bonds
The central bank decreased the money supply by _______ bonds
The fed is divided into how many districts?
Why is the fed divided into 12 districts?
To represent the unique economic interests of different parts of the country.
How many members of the fed board of governors?
How many years do the board of governors serve for?
How is money created?
When banks make loans.
European Central Bank
The entity intended to be the central bank for the world is the
International Monetary Fund
The policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two.
Banks borrow from each other overnight. In the US, they are charged the _____ rate, and in the rest of the world they are charged the ______
Federal Funds, LIBOR
London InterBank Offered Rate
A currency board issues money:
Backed by the money of other countries such as the U.S. Or Japan
The changes made to the U.S. Currency have been made to:
The interest rate the fed charges when banks borrow is called:
The two major components of M1:
Checking account and currency(cash)
Bad money drives good money out of circulation
What is fractional reserve banking?.
It's where banks must keep a percentage of their deposits
The required reserve ratio used often today is
The formula for the multiplier is
1/reserve rate or 1/reserve requirement
What charter must banks have?
Federal OR state charter
Credit unions and thrifts do not need a charter, and do not have deposit insurance
What are the components of M2?
Time deposits and savings accounts
What is intent of law?
Banks should never be leveraged more than about 8 to 1
Some banks were leveraged as high as 30 and 40 to 1 in 2007
The _______ act separated banking and stock brokers. It has since been repealed
Prior to 2000 banks in the US could only operate in one state.
What law was passed in 1908?
Betting on stock market
Congress in 1999 passed a law which prohibited the government from creating rules that regulated mortgage backed securities.
What were the names of the congressmen that passed the law in 1999 to regulate mortgage backed securities?
Why is the Fed supposed to be independent from Congress and the president and how do we keep it independent?
Because the economy is not political and thus the long terms of the governors make it independent
The neoclassical theory of economic growth states that
Savings create capital which drives growth
The highest income countries per person also the countries with the highest
Capital per person
The modern theory of growth states that growth comes from
Ideas and innovations
According to the United Nations what are the biggest obstacles to economic development for poor nations in the world today
Treatment of women
Human capital is economist's word for
The education,training and skills of workers
They United States has a high savings rate and a high rate of innovation which is why grow so fast
When all countries with lots of natural resources have a good economic growth, lack of resources does not prevent economic growth
The phrase "maximum sustainable growth" means that creating economic growth will automatically create stable prices and full employment
The phrase "maximum sustainable growth" means that creating economic growth will automatically create stable prices and full employment means
leaving inflation low
Using the government's taxing and spending powers to influence the economy
Changing the amount of money and interest rates
Targeting a specific industry
The classical economic philosophy of "hands off" is expressed by the French phrase
In the current economic crisis, a Classical economist would have done what with the failing banks and insurance companies?
let them go bankrupt, regardless of effect on anything else
Data tells us that changing taxes has the strongest effect on the economy when times are good, and less effect when times go bad
All economists agree the government can effect the economy in a positive way
The USA has traditionally used industrial policy, other countries have not
When lowering interest rates does not affect the economy, economists say that we are in a
It is called ________- when the government's borrowing to pay for something like the stimulus package makes interest rates go up, and lessen private borrowing
How would you end a demand recession?
Lower interest rate and increase money supply
How would you end a supply recession?
Turn it into a demand recession and solve it
If a recession is caused by a supply shock, how would you end it?
By doing nothing. There's nothing you can do about supply shocks
The idea that there is a trade off between inflation and unemployment in the short run is
The Phillips Curve
What do you need to grow
Quality education system and freedom to create
What is the government's job?
Maintain full employment, stable prices and economic policy
four times a yer the government has to tell us what they are doing to create jobs
Fighting inflation is number one goal
Maximum sustainability growth
Real GDP down, inflation down
Real GDP down, inflation up