Central Banks
This institution is responsible for managing a country's money supply and interest rates.
Central Bank
This is the buying and selling government bonds by the central bank.
Open Market Operations (OMO)
When the Central Bank lowers rates, borrowing usually becomes this.
Cheaper
This term describes the inverse short-run relationship between inflation and unemployment.
The Phillips curve
This occurs when actual GDP exceeds potential GDP, putting upward pressure on inflation.
Inflationary gap
This is the amount of money circulating in an economy.
Money supply
This tool involves changing how much money banks are required to keep instead of lending out.
Reserve requirement
This benchmark rate strongly influences other short-term interest rates in the U.S.
Federal funds rate
This type of unemployment can persist even the inflation is stable and the economies and it is long-run equilibrium.
Structural unemployment
In the equation of exchange, this variable measures have frequently money is used to purchase final goods and services.
Velocity of money
One major goal of a central bank is to keep this stable over time.
Price level
What is policy interest rate?
This is the interest rate the central bank can change to influence borrowing.
Higher interest rates tend to reduce this component of aggregate demand.
Investment
According to theory, unemployment returns to this level in the long run regardless of inflation.
Natural rate of unemployment
If households expect lower future income and reduce current spending this component of aggregate demand falls first.
Consumption
Central banks influence the economy mainly by changing this.
Interest rates
What is expansionary monetary policy?
When central bank increases the money supply to stimulate the economy, this policy used.
The nominal interest rate minus inflation equals this.
Real interest rate
When both inflation and unemployment are high at the same time, the economy is experiencing this condition.
Stagflation
This phenomenon occurs when increased government borrowing raises interest rates and reduces private investment spending.
Crowding out effect
This term describes actions taken by a central bank to affect inflation, unemployment, and economic growth.
Monetary policy
What is contractionary monetary policy?
When the central bank reduces the money supply to fight inflation, this policy used.
When nomina rates are at or near zero, the economy may be in the situation.
Liquidity trap
When workers negotiate wages based on expected inflation, unexpected increases in prices can temporarily reduce this type of unemployment.
Cyclical unemployment
This concept explains why an initial increase in spending can generate the larger overall increase in national income through repeated rounds of consumption.
Multiplier effect