About This Chapter
Understanding Monetary Policy - Chapter Summary
Whether you have a beginner's or more advanced understanding of monetary policy, this short chapter can help you gain full comprehension. Study topics like deposit creation, issues with U.S. monetary policy and monetarism with help from top instructors in our entertaining lessons. Use our multiple-choice quizzes and practice exam to gauge your comprehension of these topics. Any questions you develop while exploring this chapter can be submitted to our experts using the Dashboard. Once you've finished the lessons, you will have the knowledge to:
- Define and discuss the constraints of deposit creation
- Differentiate between short and long term interest rates
- Share the meaning of the liquidity trap
- List and describe issues associated with U.S. monetary policy
- Identify and discuss factors that impact the distribution of wealth and income
- Compare and contrast real and nominal interest rates
- Explain and discuss the application of the quantity theory of money
- Discuss the meaning of monetarism and describe its policy approach
1. Short vs. Long Term Interest Rates: Differences & Significance
After reading this lesson, you will understand why long-term interest rates are usually higher than short-term interest rates. You will also see some examples of why this makes sense.
2. Liquidity Trap: Definition & Graph
Loaning money to the government through investments can be profitable, but when it is not, it can pose a problem to the government's money supply. This lesson discusses the liquidity trap.
3. Factors Affecting the Distribution of Wealth & Income
Distribution of wealth and income are important parts of any society, but often, they're distributed unequally. Governments step in with various policies to try and lessen this gap. Let's explore some of these concepts.
4. Real vs. Nominal Interest Rates and Changes in Prices
This lesson explains the important difference between nominal and real interest rates and provides examples of how to use the Fisher equation to adjust nominal rates for inflation.
5. Quantity Theory of Money: Output and Prices
This lesson explains the quantity theory of money and how to apply it, including the idea that an increase in the money supply leads to inflation in the long run.
6. Monetarism: Definition & Overview
Economists are like most people: they don't always agree on how things work or should work. Monetarism is one of several schools of thought in economics. In this lesson, you'll learn about monetarism and its policy approach. A short quiz follows.
Earning College Credit
Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.
To learn more, visit our Earning Credit Page
Transferring credit to the school of your choice
Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.
Other chapters within the UExcel Introduction to Macroeconomics: Study Guide & Test Prep course
- Fundamental Concepts of Macroeconomics
- Government Failure in Macroeconomics
- Demand, Supply & the Economic Market
- Role of Government in Macroeconomics
- National Income Accounting Overview
- Unemployment & the Economy
- Basic Concepts of Inflation
- Measurements of Inflation
- The Business Cycle & Economics
- Aggregate Demand in Economics
- Fiscal Policy in Economics
- Budgets & National Debt
- Fundamentals of Money
- Understanding the Federal Reserve System
- Supply-Side Policy & Policy Comparisons
- UExcel Introduction to Macroeconomics Flashcards