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MacroEx2
Macroeconomics
| Question | Answer |
|---|---|
| 3 functions of money | store of wealth, unit of account, medium of exchange |
| M1 | currency + DD |
| M2 | M1 + deposits up to 100,000 |
| M3 | M2 + deposits greater than 100,000 |
| comptroller of the currency | regulates national banks |
| Goals of monetary policy | financial and economic stability |
| members on the board of governors | 7 |
| members of the fomc | 12 |
| fed funds rate | rate banks charge each other |
| functions of the board of governors | set monetary policy, regulate banks, approve rate changes and RR changes |
| equation of exchange | m(v) = p(y) (py = gdp) relates nominal income to quantity of money and velocity |
| assets | TR, ER, RR, loans, securities, Fed funds sold |
| liabilities | fed funds bought, capital, DD, Fed borrowings |
| open market operations | buying and selling bonds |
| transactions deposits | DD |
| non transactions deposits | passbook savings, CDs, money markets |
| non deposit borrowing | borrowing from Fed or other banks |
| money multiplier thing | m = (1+c)/(RR + e+ c) C = c/D e = ER/D |
| Financial intermediaries | 1.Engage in process of indirect finance 2.More important source of finance than securities markets 3.Make profits by reducing transactions costs 4.Reduce transactions costs by developing expertise and taking advantage of economies of scale |
| equity market | common stocks |
| money market | short term |
| capital market | long term |
| primary mkt | new security issue sold to initial buyers |
| secondary mkt | securities previously issued are bought and sold |
| exchanges | nyse, location |
| over the counter mkt | dealers in different locations buy & sell |
| adverse selection | those who are most likely to engage in a transaction are also the most likely to produce a bad outcome |
| moral hazard | people doing risky things with money they borrow |
| free rider problem | those who don't get info can take advantage of the info gathered by others (inability to profit fully from info gathering) |
| transparency | requiring firms to release info so investors can assess their true performance |
| regulatory forbearance | allowing firms to inflate asset values in order to appear sound and give out loans to insolvent firms as if they'd be repaid |
| repurchase agreements | short term borrowing which uses mortgage back securities as collateral |
| haircuts | requiring larger amounts of collateral, more than the loan, due to concerns over a bank's balance sheet |
| shadow banking system | hedge funds and investment banks, etc. |
| Ireland | real estate bubble, gdp fell, unemployment 12.5% |
| japan | regulatory forbearance, lost decade |
| law of one price | an identical good in 2 countries (with low transportation and trade barriers) should have the same price |
| theory of purchasing power | exchange rates between two countries will adjust to reflect changes in price level |
| depreciation and appreciation affected by | monetary policy, political faith, supply and demand |
| inc in domestic price level or import demand | decr in exchange rate |
| inc in export demand or productivity | incr in exchange rate |
| inc in domestic interest rate | incr in exchange rate |
Created by:
jbryant
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