An activist policy is a government economic policy that uses elements of monetary and/or fiscal policy to respond dynamically to current economic conditions with the objective of stabilizing the economy.
Aggregate demand is the total quantity of goods and services demanded across all levels of an economy at a particular time and price level. It reflects the aggregate expenditure for 'everything that will be bought' in an economy.
The Bank for International Settlements (BIS) aims to promote global monetary and financial stability through international cooperation among central banks and financial supervisory authorities.
The central bank of the United Kingdom, responsible for setting monetary policy, providing financial stability, and serving as the government's bank.
The interest rate at which a nation's central bank lends money to domestic banks or the rate at which domestic banks can borrow from the central bank.
The base rate is the benchmark interest rate set by a nation's central bank, influencing the rates commercial banks charge borrowers and pay to depositors.
A central bank provides financial and banking services for the government of a country and its commercial banking system, while also implementing the government's monetary policy.
Core inflation is the measure of inflation which excludes certain volatile items, usually food and energy, to provide a clearer picture of the long-term inflation trend.
Debasement is the act of deliberately rendering a currency less valuable, not through devaluation but by reducing the precious metal content of the coinage.
The Depository Institutions Deregulation and Monetary Control Act of 1980 significantly reformed the banking industry by removing regulatory constraints and enhancing the Federal Reserve's control over monetary policy.
Discretionary Policy refers to government economic policies that are not automatic or built into the system but require active intervention by policymakers to influence economic activities.
Disinflation refers to a decrease in the rate of inflation – a slowdown in the rate at which prices are increasing across the economy. Unlike deflation, disinflation is characterized by a reduction in the inflation rate over time, without causing a drop in economic output or employment.
The adoption by a country of the US dollar in place of its own currency, usually as a means of controlling inflation and interest-rate volatility.
Double-Digit Inflation refers to an inflation rate of 10% per year or higher, significantly impacting purchasing power, savings, and economic stability.
Easy money refers to a state of the national money supply when the Federal Reserve System allows ample funds to build in the banking system, resulting in lowered interest rates and increased loan accessibility, which encourages economic growth and can potentially lead to inflation.
The European Central Bank (ECB) is the central bank responsible for monetary policy within the Eurozone, ensuring price stability and regulating member banks. It plays a critical role in European and global financial markets.
The European Central Bank (ECB) is the central bank for the eurozone, responsible for monetary policy and issuance of euros in member states.
The European Central Bank (ECB) is the central bank of the European Union, established in 1998. It is responsible for eurozone monetary policy, particularly the setting of interest rates, and operates independently of national governments.
The European Currency Unit (ECU) served as the precursor to the Euro and was a unit of account used by the European Economic Community before the adoption of the Euro.
The European Economic and Monetary Union (EMU) represents an umbrella term for the group of policies aimed at converging the economies of European Union (EU) member states including the adoption of a single currency, the Euro.
The European Economic and Monetary Union (EMU) signifies the convergence of EU member states' economies, overseeing the adoption of a single currency—the euro, and coordinating national economic policies.
The European Economic and Monetary Union (EMU) is the policy framework that resulted in the creation of the European Central Bank (1998) and a single European currency for participating states.
The European Monetary System (EMS) was an arrangement designed to stabilize exchange rates and synchronize economic policy-making among European Community member states. It aimed to lay the groundwork for future economic and monetary union within Europe.
The European Monetary System (EMS) was a framework established to stabilize exchange rates, curb inflation, and prepare for Economic Monetary Union within the European Union.
The Eurozone comprises the 19 member countries of the European Union that have adopted the euro as their currency, collectively managed under the monetary policy dictated by the European Central Bank.
Excess reserves refer to the funds that a bank holds over and above the required reserve set by the central bank (e.g., Federal Reserve). These funds can be kept on deposit with the central bank, an approved depository bank, or in the physical possession of the bank.
The Exchange Rate Mechanism (ERM) is a system introduced by the European Economic Community to reduce exchange rate variability and achieve monetary stability in Europe ahead of the introduction of a single currency, the Euro.
Federal funds are reserve balances that private banks in the U.S. hold at Federal Reserve banks. These funds are used for various types of inter-bank transactions, including lending to other banks that have insufficient reserves.
Non-interest-bearing deposits held at the US Federal Reserve System that are traded between member banks. The Federal funds rate or Fed funds rate is the overnight rate paid on these funds.
The Federal Funds Rate is the interest rate at which depository institutions (such as banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. This rate is pivotal in the financial system as it influences many other interest rates, such as those for savings accounts, loans, and mortgages, and it's a key indicator of monetary policy direction in the United States.
The Federal Open Market Committee (FOMC) is a key committee within the Federal Reserve System responsible for setting short-term monetary policy in the United States. The FOMC is instrumental in regulating the money supply and influencing economic conditions to achieve sustainable economic growth.
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System that determines the direction of monetary policy specifically by directing open market operations.
One of the 12 regional banks that, along with their branches, constitute the Federal Reserve System in the United States. These banks play a crucial role in monitoring the commercial and savings banks in their respective regions, ensuring compliance with Federal Reserve Board regulations, and providing access to emergency funds through the Discount Window.
The Federal Reserve Board, often referred to simply as the Fed, is the governing body of the Federal Reserve System, the central bank of the United States. Its major responsibilities include overseeing monetary policy, regulating banks, maintaining financial stability, and providing financial services.
The Federal Reserve Board (FRB) is the governing body of the Federal Reserve System, responsible for setting key policies, including reserve requirements, bank regulations, and discount rates.
A Federal Reserve District is one of twelve regions created by the Federal Reserve System, each served by a regional Federal Reserve Bank. These banks provide various financial services, regulatory oversight, and economic research relevant to their specific districts.
The Federal Reserve Open Market Committee (FOMC) is a branch of the Federal Reserve Board that determines the direction of monetary policy specifically by directing open market operations.
The Federal Reserve System (Fed) is the central banking system of the United States, created by the Federal Reserve Act of 1913. It regulates the nation's monetary policy, oversees the cost and supply of money, and supervises international banking through agreements with other central banks.
The Federal Reserve System, established by the Federal Reserve Act of 1913, is the central banking system of the United States, playing a crucial role in regulating the country's monetary and banking system.
Fiat money is a type of currency that is made legal tender by government law or regulation, without backing by a physical commodity like gold or silver. Its value derives from the trust and authority of the government that issues it.
The floating currency exchange rate, also known as a flexible exchange rate, is the movement of a foreign currency exchange rate in response to changes in market forces of supply and demand. The value of a country's currency is determined by market conditions rather than by any direct intervention by the central or national government.
Flow of funds in economics refers to the way in which capital moves across various sectors of the economy, transferring from savings surplus units to savings deficit units through financial intermediaries.
Fractional reserve banking is a regulation in the banking industry whereby banks (and other similar institutions) keep reserves that are less than their total deposits.
The Gilt Repo Market is a platform for the sale and repurchase of gilt-edged securities, established by the Bank of England in 1996. This market plays a crucial role in the implementation of monetary policy by influencing the liquidity within the banking system.
Inconvertible money is a type of currency that cannot be exchanged for precious metals or other commodities that generally serve as backing for money. Examples include Federal Reserve notes in the United States.
A general increase in prices in an economy, leading to a consequent fall in the purchasing value of money.
Inflation targeting is a monetary policy strategy where a central bank sets an explicit target rate for inflation and uses tools such as interest rate adjustments to achieve this target. This policy was first adopted by New Zealand in 1990 and has since been implemented by over 50 countries, including the UK and a more flexible approach by the USA.
Intervention in economics refers to government economic activity with the objective of influencing economic growth, controlling inflation, impacting the composition of the economy's output, and more.
Economic analysis developed by John Maynard Keynes based on the interaction of the money market and the goods market. It helps predict the effect of monetary and fiscal policies on interest rates and domestic production.
A liquidity trap is an economic situation where adding liquidity through increased money supply and lowered interest rates fails to stimulate borrowing, lending, consumption, and investment. It can sometimes be escaped through fiscal policy or distributing money directly to people.
A managed currency is a type of currency whose international value and exchangeability are heavily regulated by its issuing country. It often involves strategic interventions by the country's central bank to stabilize or control the currency's value in the international market.
A Member Bank is a financial institution that is part of the Federal Reserve System, including all nationally chartered banks and state-chartered banks that meet certain standards and are accepted for membership.
Pertaining to, or having to do with, money, money creation, money supply, and government management of money.
Monetary policy comprises the procedures by which governments or central banks try to affect macroeconomic conditions by influencing the supply of money. This can be achieved through various mechanisms aside from printing more money, including open-market operations, adjusting reserve requirements, and changing interest rates.
The committee of Bank of England officials and outside economic experts that has been responsible for setting interest rates in the UK since 1997. Prior to this date, interest rates were set by the Treasury.
The Monetary Policy Committee (MPC) is a body within central banks that is responsible for setting the interest rates and other monetary policies to achieve economic stability and growth.
A Monetary Standard is the set of procedures or policies that a government uses to ensure the value and reliability of its currency, fostering faith among the public and international markets.
Monetizing the debt refers to the process by which a government finances its national debt by printing new money, which often leads to inflation.
Money serves as a medium of exchange, a unit of account, a store of value, and a means for deferred payment. It has driven economic development by simplifying the exchange of goods and services.
A comprehensive guide to understanding the money demand schedule, which represents the demand for money at varying levels of GDP. This includes the asset demand for money and the transactions demand for money.
The money supply measures the amount of money circulating in an economy, categorized into different components such as M1, M2, and M3, which include cash, checking deposits, savings deposits, and other financial instruments.
Moral suasion is a strategy used primarily by central banks like the Federal Reserve to influence financial institutions and markets through persuasion or appeal to ethical standards, rather than through direct action or legislation.
The nominal interest rate is the rate of return on an investment that is unadjusted for the effect of inflation. It is distinguished from the real rate, which is the nominal rate less the rate of inflation.
Open-Market Operations (OMO) are activities conducted by the securities department of the Federal Reserve Bank of New York, often referred to as the 'Desks', under the direction of the Federal Open Market Committee (FOMC). These operations involve the buying and selling of government securities to regulate the money supply within the economy.
Open-market rates refer to the interest rates on various debt instruments bought and sold in the open market, which are directly responsive to supply and demand. These rates differ from the discount rate set by the Federal Reserve Board.
Strictly speaking, to engrave and produce physical currency. Connotatively, it means adding to the supply of money and credit for the purpose of monetizing debt or stimulating spending, implicitly leading to inflation or, at worst, hyperinflation.
Quantitative Easing 2, often abbreviated as QE2, was a controversial monetary policy program implemented by the U.S. Federal Reserve in 2010 to purchase $600 billion in U.S. Treasury bonds. The program aimed to reduce interest rates and stimulate economic growth but raised concerns about potential inflation.
Quantitative Easing (QE) is a non-traditional monetary policy used by central banks to stimulate the economy by increasing the money supply and lowering interest rates.
Quantitative Easing (QE) is a monetary policy tool used primarily by central banks to stimulate the economy by purchasing long-term securities in the open market, thereby increasing the money supply and lowering interest rates to boost economic activity.
Quantitative Easing (QE) is a monetary policy used by central banks to stimulate the economy when conventional monetary policy becomes ineffective. Primarily enacted during periods of low or zero interest rates, QE involves the creation of new money electronically to purchase government securities and increase the money supply.
Quantitative easing (QE) is a form of unconventional monetary policy in which a central bank purchases longer-term securities from the open market to increase the money supply and encourage lending and investment.
The rediscount rate is the interest rate charged to commercial banks and other depository institutions when they borrow funds from the Federal Reserve through its discount window.
A Repurchase Agreement, commonly referred to as a Repo or RP, is a common financial instrument involving an agreement between a seller and a buyer, typically involving U.S. government securities, where the seller agrees to repurchase the securities at a specified price and time.
Reserve assets are financial instruments that a central bank or a government holds to implement monetary policy and ensure financial stability. These assets are crucial for maintaining liquidity, managing exchange rates, and backing up domestic currency.
Understanding the Federal Reserve System's rule mandating the financial assets that member banks must keep in the form of cash and other liquid assets as a percentage of demand deposits and time deposits.
Revalorization of currency involves replacing one currency unit with another to counteract the effects of frequent or significant currency devaluation, often associated with high inflation rates.
Selective Credit Controls represent the ability of the Federal Reserve Board (FRB) to establish specific terms and conditions for various credit instruments, particularly affecting the trading of securities in the stock market through margin requirements.
A soft landing refers to a situation in which an economy slows down but manages to avoid falling into a recession. This term was borrowed from astronautics in the late 1950s and originally described a safe moon landing.
Stabilization refers to various efforts and actions aimed at maintaining equilibrium in financial, economic, or market environments, ensuring stability in currency exchange rates, economic cycles, or securities prices.
An economic condition in which credit is difficult to secure, usually due to actions taken by the Federal Reserve Board to restrict the money supply.
