Macroeconomics Unit 4

Percentage of deposits that the Fed requires banks to hold back and not lend out

• Fed Fund Rate

• Reserve Requirement Rate

• Discount Rate

• I.O.U Rate

The interest rate the Fed charges commercial banks for loans

• Fed Fund Rate

• Reserve Requirement Rate

• Discount Rate

• I.O.U Rate

Any action taken by the Federal Reserve that either speeds up or slows down the economy is referred to as...?

• Monetary Policy

• Fiat Currency

• Currency Policy

• Insider Trading

How will it affect the economy if the Federal Reserve increases the Overnight rate (most call it the discount rate)?

• It will speed up the economy

• It will slow down the economy

• Nothing will happen

• Banks will get mad

In the U.S., the federal funds rate is the interest rate on ______, and is controlled by the _________.

• reserves that banks lend to each other; Treasury Department

• reserves that banks lend to each other; President and Congress

• loans from the Fed to banks; President and Congress

• reserves that banks lend to each other; Federal Open Market Committee

• loans from the Fed to banks; Federal Open Market Committee

The _____________ shows the relationship between the quantity of money demanded and the interest rate.

• Money Demand Curve

• Money Supply Curve

• Loanable Funds Market

• Fisher Effect

The _____________ shows the relationship between the quantity of money supplied and the interest rate.

• Money Supply Curve

• Money Demand Curve

• Loanable Funds Market

• Fisher Effect

The _____________ is a hypothetical market that brings together those who want to lend money and those who want to borrow money.

• Loanable Funds Market

• Crowding Out

• Rate of Return Market

• Supply and Demand Market

_____________ occurs when a government deficit drives up the interest rate and leads to reduced investment spending.

• Crowding Out

• Rate of Return

• Loanable Funds Market

• Fisher Effect

According to the _____________, an increase in expected future inflation drives up the nominal interest rate by the same number of percentage points, leaving the expected real interest rate unchanged.

• Fisher Effect

• Farmer Effect

• Business Effect

• Tech Effect