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70 Cards in this Set
- Front
- Back
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U.S BLS surveys 60,000 households monthly; asks a series of questions to all
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Calculating the Unemployment Rate
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Worked for pay during survey week or on vacation, sick, bad weather, strike
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Employed
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Did no work for pay and actively looked for work in the last 4 weeks
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Unemployed
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Did no work for pay and did not actively look
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Not in the Labor Force
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Employed + Unemployed
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Labor Force
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The percentage of the labor force defined as unemployed
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Unemployment Rate
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5.5%
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Current Unemployment Rate
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5 to 6%
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Full-Employment Unemployment Rate
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Those just entering labor force or changing jobs
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Frictional
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Those without marketable skills or a mismatch between skills and openings
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Structural
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Those unemployed in a recession-(Traditionally)- anything over 6 or so-
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Cyclical
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Frictional + Structural
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Natural Rate of Unemployment
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Those we think want work, but have given up looking And so, not in the labor force
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Discouraged workers
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District of Columbia 7.8% Nevada 7.1% Mississippi 7.05 California 6.7% |
States with the highest unemployment
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Nebraska 2.7%
North Dakota 2.9% Utah 3.4% South Dakota 3.4% Minnesota 3.4% |
States with the lowest unemployment
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start with the richest 20%
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Household income it takes in the U.S today to be rich
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80% of households earn less
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The minimum household income that will put you in the top 20% of household in terms of earnings
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1. Medium of Exchange
2. Standard of Value 3. Store of Value |
Functions of Money
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Avoid barter(swapping item for w/o using money) and requirement of coincidence of wants
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Medium of Exchange
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A way to measure value
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Standard of Value
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One way of holding your wealth
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Store of Value
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An item that has value other than as a medium of exchange; can be acceptable, relatively scarce, divisible, portable, and durable
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Commodity Money
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the most narrow definition of the Money Supply
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M1
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Currency+ Check-able Deposits
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M1
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Coins + Paper Money
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Currency
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2 to 3%
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Coins
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Federal Reserve Notes-53%
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Paper Money
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U.S Currency; Face value unrelated to intrinsic value (cost of production)
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Token Money
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44% of M1; Deposits in commercial bank and "thrift" or savings institutions on which checks of any size be drawn
Safety and convenience of checks/debit card |
Check-able Deposits
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A "broader" measure of money supply
Everything in M1 plus Saving Deposits and (small) Time Deposits (CDs) |
M2
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Highly liquid financial assets that can be easily converted into currency or check-able deposits
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Near-Monies
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ability to use in day to day transactions
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Demand(Check-able) Deposits
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no check writing privileges
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Saving Deposits/Accounts
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(Banking Act of 1933) that maintains this distinction through 1986 and...
Bans payment of interest on demand deposits and... Limited the payment interest on savings and time deposits (imposed interest rate ceilings) |
Regulation Q
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1. Banks use non-monetary incentives to lure customers
2. Discounts on loans/special treatment 3. Convenience Features-multiple branches 4. Emergence of alternatives to banks |
Impacts on Regulation Q
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1. Acceptability
2. Relative Scarcity 3. Legal Tender |
Qualities that gives money value
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We accept money because we know it is exchangeable for real goods and services |
Acceptability |
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Given a reasonable constant demand for money, the value of purchasing power of money is determined by supply of money |
Relative Scarcity |
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You are required to accept money in payment for a debt, unless it is in nickels and pennies |
Legal Tender |
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Money by decree |
Fiat Money |
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Measuring the overall measure of the money supply |
M1 and M2 |
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The amount of goods and services a unit of money will buy The amount a dollar will buy inversely with the price level When the CPI goes up, the value of the dollar goes down, and vice versa |
Purchasing Power of Money |
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12 district Federal Reserve Banks |
The amount of banks the Fed Reserve Has |
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All performing the same central banking operations |
Central Bank |
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Almost public, but not because they are privately owned, but operated in the public interest (non-profit) |
Qausi- Public Banks |
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Who are owned by the commercial banks in their districts? |
Central Banks |
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They perform the same functions for the banks that banks performs for you-lender of last resort |
Banker's Bank |
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What two things does the Federal Reserve has? |
Board of Governors and Federal Open Market Committee (FOMC) |
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This is the Policy making arm of the Fed Reserve System Has 7 members Appointed by President with Congress approval 14 year term 1 of 7 "Chair" 4 year term |
Board of Governors |
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They are responsible for key-tool-open market operations Made up of 7 members of the Board of Governors and 5 District FED bank presidents Other 4 seats rotate 8 regularly scheduled meeting a year |
FOMC |
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Who is always on committee? |
New York Fed Bank President |
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1. Hold deposits of commercial banks-reserves 2. Assist in the check-clearing process 3. AS a fiscal agents of Federal Gov't 4. Supervise commercial banks(a bank regulator) 5. Regulate the Money Supply |
Functions of the Fed Reserve System |
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Holding reserves and controlling the money supply |
The key functions of the FED |
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The manipulation of the money supply to achieve price stability, economic growth, and full employment (goes back to our macroeconomic goals) |
Monetary Policy |
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The manipulation of Government Spending and Taxes to achieve price stability, economic growth, and full employment |
Fiscal Policy |
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Commercial banks required to hold only a fraction reserved assets |
Fractional-Reserve Banking |
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The amount or fraction that the bank is allowed to keep of the bank's check able deposits |
10% |
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This also allows banks to increase the money supply by making loans |
Fractional-Reserve Banking |
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The key to a bank's ability to make loans is to have.... |
Excess Reserves |
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Used to stimulate sluggish or recessionary economy and this policy works when.. Increased Reserves---> More Loans Increased Money Supply--> Lower Interest Rates Lower Interest Rates---> More Spending |
Expansionary Monetary Policy |
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.08 to .14 |
Short-Term Interest Rates |
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This occurs when the economy attempts to spend beyond its capacity to produce |
Demand-Pull Inflation |
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Used to discourage spending and this type of policy works Deceased Reserves--> Fewer Loans Decrease Money Supply--> Increases Interest Rates Higher Interest Rates--> Less Spending TAKE AWAY THE PUNCH BOWL |
Restrictive or Tight Monetary Policy |
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The year inflation went up 13% |
1979 |
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FED buys and sells the Gov. Securities (commercial) banks are holding to move reserves in and out of the banking system |
Open Market Operations |
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The interest rate banks charge each other to borrow reserves-FED does not set this rate but does "target" changes in rate thru Open Market Operations |
Federal Funds Rate |
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Upper limit of Federal Funds Target Rate |
.25% |
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The interest rate the FED charges banks for temporary loans to meet reserve requirements; Fed does set this rate |
Discount Rate |
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More Reserves--> More Money--> Lower Federal Funds Rate |
Expansionary OMO
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Less Reserves--> Less Money--> Higher Federal Funds Rate |
Restrictive OMO |
