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Macroeconomics pt. 2

uiuc econ 103 2nd midterm

QuestionAnswer
Commodity monies Money that has intrinsic value
Fiat or token monies Money that is intrinsically worthless
Legal tender Government endorsed money
Money Anything excepted as a medium of exchange
Barter Direct exchange of goods and services for others
M1 or transactions money Can be directly used for transactions (Cash, traveler's checks, etc)
M2 or broad money Close substitutes for transactions money (savings accounts, money market, etc)
Financial intermediaries Banks that link lenders and borrowers
Run When many people claim money from a bank
Federal Reserve System Central bank of the USA
Reserves Deposits a bank has at the Fed plus cash on hand
Required reserve ratio Percentage of total deposits that a bank must keep at the Fed
Federal Open Market Committee Sets goals regarding the money supply and interest rates and directs operations of the Open Market Desk
Open Market Desk Where government securities are bought and sold
Transaction motive Desire to have money for purchasing
Nonsynchronization of income and spending Mismatch between income intervals and outflow of money
Speculation motive Desire to have bonds when interest is high to sell them when it's low
Equilibrium interest rate Point at which the money demand equals money supply
Tight monetary policy Policies that contract the money supply
Easy monetary policy Policies that expand the monetary supply
Federal funds rate Interest rate of private banks borrowing from each other
Goods market Market in which goods and services are exchanged and from which aggregate output is determined
Money market Market in which financial instruments are exchanged and from which the equilibrium level of interest in determined
Expansionary fiscal policy Increase in government spending or reduction in net taxes to increase aggregate output
Expansionary monetary policy Increase in the money supply to increase aggregate output
Crowding-out effect Tendency for increases in government spending to cause a decrease in private investment spending
Aggregate demand Total demand for goods and services
Aggregate demand curve Relationship between income and price levels, goods and money markets are both in equilibrium
Aggregate supply Total supply of all goods and services
Aggregate supply curve Relationship between aggregate output quantity and price levels
Cost shock or supply shock Change in costs that shifts the aggregate supply curve
Equilibrium price level Point at which aggregate supply and demand curves intersect
Inflation Increase in overall price level
Demand-pull inflation Initiated by increased aggregate demand
Cost-push or supply-side inflation Initiated by increased costs
Stagflation When output falls as prices rise
Frictional unemployment Portion due to normal labor market problems
Structural unemployment Portion due to changes in the structure of the economy
Cyclical unemployment Increase/decrease of unemployment due to the normal business cycle
Created by: profaneomen