economics mr. bordelon fiscal and monetary policy review
TRANSCRIPT
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ECONOMICSMR. BORDELON
Fiscal and Monetary PolicyReview
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Key Terms
Policy used to increase overall demand and GDP.
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Key Terms
Policy used to increase overall demand and GDP. Expansionary fiscal policy
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Key Terms
Theory that states that the economy regulates itself.
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Key Terms
Theory that states that the economy regulates itself. Classical economic theory
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Key Terms
Long-term bond, issued sometimes for as long as 30 years.
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Key Terms
Long-term bond, issued sometimes for as long as 30 years. Treasury bond
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Key Terms
Occurs when government has money left over after paying all of its expenses for the year.
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Key Terms
Occurs when government has money left over after paying all of its expenses for the year. Budget surplus
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Key Terms
Government’s use of taxing and spending and transfers to affect overall economy.
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Key Terms
Government’s use of taxing and spending and transfers to affect overall economy. Fiscal policy
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Key Terms
Rate Federal Reserve charges for loans to commercial banks.
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Key Terms
Rate Federal Reserve charges for loans to commercial banks. Discount rate
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Key Terms
Process by which money enters into circulation.
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Key Terms
Process by which money enters into circulation. Money creation
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Key Terms
Seven-member board that oversees Federal Reserve System.
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Key Terms
Seven-member board that oversees Federal Reserve System. Board of Governors
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Key Terms
Monetary policy that reduces the money supply.
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Key Terms
Monetary policy that reduces the money supply. Contractionary monetary policy
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Key Terms
Reserves greater than the required amounts.
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Key Terms
Reserves greater than the required amounts. Excess reserves
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Key Terms
Process by which banks record whose account gives up money and whose account receives money when a customer writes a check.
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Key Terms
Process by which banks record whose account gives up money and whose account receives money when a customer writes a check. Check clearing
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Key Terms
federal funds rateFederal Reserve Districtprime ratebudget deficitsautomatic stabilizersbalanced budget
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Main Ideas
Name and describe limits of fiscal policy.
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Main Ideas
Name and describe limits of fiscal policy. Policy lag Political pressure Predicting future economic activity (time lag)
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Main Ideas
Describe the multiplier effect.
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Main Ideas
Describe the multiplier effect. Effects of fiscal policy are multiplied in the market.
Every dollar of change in fiscal policy translates into more than a dollar of change in overall national income.
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Main Ideas
What is national debt?
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Main Ideas
What is national debt? National debt is sum of government borrowing.
Measured sometimes by comapring it to GDP (debt calculated as a percentage of GDP).
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Main Idea
What is the difference between the national debt and budget deficit?
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Main Idea
What is the difference between the national debt and budget deficit? National debt is all of the money that federal
government owes. Deficit is the amount of money government borrows for one fiscal year.
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Main Ideas
What options does the government have to respond to a budget deficit (think fiscal policy tools)?
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Main Ideas
What options does the government have to respond to a inflationary gap (think fiscal policy tools)? Increase taxes Decrease spending Decrease transfers
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Main Ideas
Name services the Federal Reserve offers banks.
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Main Ideas
Name services the Federal Reserve offers banks. check clearing supervising lending practices lender of last resort
What about the gov’t?
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Main Ideas
What is the money multiplier formula?
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Main Ideas
What is the money multiplier formula? 1/rrr
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Critical Thinking
What’s the difference between classical and Keynesian economics?
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Critical Thinking
What’s the difference between classical and Keynesian economics? Classical economics focuses on self-regulation of the
free market. Keynesian economics supports government
interaction within the market.
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Critical Thinking
How do automatic stabilizers affect the U.S. economy?
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Critical Thinking
How do automatic stabilizers affect the U.S. economy? Automatic stabilizers try to keep recessions and
inflation from having such a large impact on the economy. Without them, the economy could end up with depression or hyperinflation.
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Critical Thinking
What is the crowding-out effect, and how can it influence economic growth?
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Critical Thinking
What is the crowding-out effect, and how can it influence economic growth? When governments borrow money, there is less money
available to invest in businesses. If people do not invest in businesses, economic growth slows down.
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Critical Thinking
Why do you think open-market operations are the most commonly used monetary policy tool?
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Critical Thinking
Why do you think open-market operations are the most commonly used monetary policy tool? Open market operations have an almost immediate
effect on the money supply, which is more advantageous than dealing with the required reserve or discount/federal funds rates because they can take longer.