ECON-1010 Chapter Notes - Chapter 14: Open Market Operation, Federal Funds Rate, Nominal Interest Rate

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ECON-1010 Full Course Notes
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Chapter 14 the federal reserve and monetary policy. When the federal reserve lowers interests rates, investment spending and gdp increase because the cost of funds is cheaper. When the increases interests rates, investment spending and gdp decrease because the cost of funds is higher. The money market: the market for money in which the amount supplied and the amount demanded meet to determine the nominal interest rate. Nominal interest rate - the stated or quoted interest rate before adjusting for in ation. Once we understand what affects the demand for money, we can see how the actions of the. Stocks - shares in the ownership of a corporation. Two sources of income from stocks: dividends paid to their owners out of the pro ts of the corporation and the typical increase in their value over time. Bonds - loans that are repaid with interest.

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