| A | B |
|---|
| money creation | the process by which money enters into circulation |
| required reserve ratio | ratio of reserves to deposits required of banks by the Federal Reserve |
| money multiplier formula | amount of a new money that will be created with each demand deposit |
| excess reserves | in banking, reserves of cash more than the required amounts |
| prime rate | rate of interest banks charge on short-term loans to their best customers |
| open market operations | the buying and selling of government securities to alter the supply of money |
| monetarism | the belief that the money supply is the most important factor in macroeconomic performance |
| easy money policy | monetary policy that increases the money supply |
| tight money policy | monetary policy that reduces the money supply |
| inside lag | delay in implementing monetary policy |
| outside lag | the time it takes for monetary policy to have an effect |
