What is the newspaper definition of a recession?
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Two successive quarters of negative real growth
1. What assets are bought and sold in an Open Market Operation?
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Government Bonds are bought and sold in an Open Market Operation
Fiscal Multipliers
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A fiscal multiplier measures the change in GDP that comes from a change in
government spending
1. Why is monetary policy usually ineffective in a deep recession?
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In a deep recession, the banks are unwilling to lend and the investors do
not want to take on any loans
1. For a given increase in GDP (∆Y) will an increase in spending or a cut in taxes create
a larger deficit?
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Cut in taxes
1. Recognize the Equation of Exchange: MV = PQ
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M = Money Supply, V = Velocity of Money, P - General Price Level, Q =
Quantity Output
, 1. Why does the Fed sometimes increase the money supply at the beginning of a
downturn/recession? Who is the target of that policy? (they do it to lower nominal
interest rate, investors are the target)
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The Fed increases the money supply at the beginning of a downturn to
lower the nominal interest rate. The target of this policy is investors
1. What is the largest account in the Current Accounts?
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The largest account in the current accounts is Merchandise Trade
1. ∆M given ∆B and the required reserve ratio
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M = Money Supply, B = Bonds, R = .1
1. What is asset demand for money?
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Give this one a try later!
Two successive quarters of negative real growth
1. What assets are bought and sold in an Open Market Operation?
Give this one a try later!
Government Bonds are bought and sold in an Open Market Operation
Fiscal Multipliers
,Give this one a try later!
A fiscal multiplier measures the change in GDP that comes from a change in
government spending
1. Why is monetary policy usually ineffective in a deep recession?
Give this one a try later!
In a deep recession, the banks are unwilling to lend and the investors do
not want to take on any loans
1. For a given increase in GDP (∆Y) will an increase in spending or a cut in taxes create
a larger deficit?
Give this one a try later!
Cut in taxes
1. Recognize the Equation of Exchange: MV = PQ
Give this one a try later!
M = Money Supply, V = Velocity of Money, P - General Price Level, Q =
Quantity Output
, 1. Why does the Fed sometimes increase the money supply at the beginning of a
downturn/recession? Who is the target of that policy? (they do it to lower nominal
interest rate, investors are the target)
Give this one a try later!
The Fed increases the money supply at the beginning of a downturn to
lower the nominal interest rate. The target of this policy is investors
1. What is the largest account in the Current Accounts?
Give this one a try later!
The largest account in the current accounts is Merchandise Trade
1. ∆M given ∆B and the required reserve ratio
Give this one a try later!
M = Money Supply, B = Bonds, R = .1
1. What is asset demand for money?
Give this one a try later!
