ECON 101 Chapter Notes - Chapter 11: Rein, Open Market Operation, Aggregate Demand
Document Summary
Interest rate : payment made to agents that lend or save money (expressed as percentage of the monetary amount). Can also be called nominal interest rate of price of money. If the federal reserve were to reduce the reserve requirement, we would expect lower interest rates, an expanded gdp, and a higher inflation rate. Money marke t: a market in which the demand for and supply of money determines an interest rate or opportunity cost of holding money balances. Monetary policy : actions taken by country"s central bank to influence the supply of money and credit in the economy. A restrictive monetary policy would decrease the money supply, and would raise interest rates, decrease investment spending, and decrease aggregate demand and gdp. Expansionary - taken actions to expand the money supply and lower interest rates with the objective of increasing real gdp and reducing unemployment.
