The Monetary Policy Reaction Curve

question 73

Multiple Choice

The monetary policy reaction curve:

• A) is the guideline the Fed publishes in setting their interest rate target.
• B) approximates the behavior of central bankers.
• C) has remained fairly constant over the years.
• D) is set by Congress and given to the Fed as a guideline to follow.

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Definitions:

Deposits in Transit

Funds that have been sent to a bank but have not yet been recorded in the bank's records and thus do not appear in the bank balance.

Book Balance

The balance of an account according to the accounting records, not necessarily reflecting the available cash or cleared funds.

Bank Balance

The total amount of funds available in a bank account at a given moment, including all deposits and subtracting any withdrawals.

Outstanding Checks

Checks that have been written and recorded in the accounting books but have not yet been cashed or cleared by the bank.