Chapter 7: Monetary System, Monetary and Fiscal Policy

In this section

• Money, Central Banks, and the Money Supply
  Money, Central Banks, and the Money Supply (CFA Level 1): Defining Money and Its Functions, Evolution of Money: From Gold to Fiat, and Role of Central Banks. Key definitions, formulas, and exam tips.
• Demand for Money and the Equation of Exchange
  Demand for Money and the Equation of Exchange (CFA Level 1): Why Households and Firms Hold Money, Keynesian Approach to Money Demand, and Monetarist View and the Quantity Theory of. Key definitions, formulas, and exam tips.
• Inflation Targeting and Other Monetary Policy Regimes
  Inflation Targeting and Other Monetary Policy Regimes (CFA Level 1): Inflation Targeting: Meaning and Mechanics, Core Principles, and Monetary Policy Tools to Achieve the Target. Key definitions, formulas, and exam tips.
• Automatic Stabilizers and the Role of Government Debt
  Automatic Stabilizers and the Role of Government Debt (CFA Level 1): Defining Automatic Stabilizers and Comparing Automatic Stabilizers with Discretionary Fiscal Policy. Key definitions, formulas, and exam tips.
• Implementation Lags in Monetary and Fiscal Policy
  Implementation Lags in Monetary and Fiscal Policy (CFA Level 1): Nature of Policy Lags, Recognition Lag, and Decision (Legislative or Administrative) Lag. Key definitions, formulas, and exam tips.
• Monetary Policy Tools and Transmission Mechanisms
  Monetary Policy Tools and Transmission Mechanisms (CFA Level 1): Major Monetary Policy Tools, Open Market Operations (OMOs), and Policy Rates (Discount Rate, Base Rate, Fed Funds. Key definitions, formulas, and exam tips.
• Fiscal Policy Tools (Government Spending, Taxation, Budgets)
  Fiscal Policy Tools (Government Spending, Taxation, Budgets) (CFA Level 1): Government Spending, Public Goods, and Transfer Payments. Key definitions, formulas, and exam tips.
• Fiscal Multipliers
  Fiscal Multipliers (CFA Level 1): Defining Fiscal Multipliers, Why Do Multipliers Exist?, and Government Spending Multiplier. Key definitions, formulas, and exam tips.
• Interactions between Monetary and Fiscal Policy
  Interactions between Monetary and Fiscal Policy (CFA Level 1): Coordinated Policy for Growth and Price Stability, Policy Mix, and Toward an Optimal Mix. Key definitions, formulas, and exam tips.
• Monetary Policy Strategy (Exchange Rate vs. Inflation Targeting)
  Monetary Policy Strategy (Exchange Rate vs. Inflation Targeting) (CFA Level 1): Exchange Rate Targeting vs. Inflation Targeting, Benefits and Drawbacks of a Fixed Exchange Rate, and Benefits. Key definitions, formulas, and exam tips.
• Central Bank Independence and Credibility
  Central Bank Independence and Credibility (CFA Level 1): Why Independence Matters, Credibility, Communication, and Public Perception, and Operational Independence. Key definitions, formulas, and exam tips.
• Unconventional Monetary Policies (Quantitative Easing)
  Unconventional Monetary Policies (Quantitative Easing) (CFA Level 1): Which of the following best describes a primary and increase in the central bank’s balance sheet. Key definitions, formulas, and exam tips.
• Zero Lower Bound Constraints and Negative Interest Rates
  Zero Lower Bound Constraints and Negative Interest Rates (CFA Level 1): Understanding the Zero Lower Bound, Why Zero is Viewed as a ‘Natural Floor’, and Negative Interest Rate Policies (NIRP). Key definitions, formulas, and exam tips.
• Supply‐Side Economics and the Laffer Curve
  Supply‐Side Economics and the Laffer Curve (CFA Level 1): Foundations of Supply-Side Economics, Core Policy Levers, and Introducing the Laffer Curve. Key definitions, formulas, and exam tips.