Fiscal and Monetary Policy Process
Glossary terms from:
Something of monetary value owned by an individual or an organization.
A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.
The industry involved with conducting financial transactions. Also, conducting business with a bank, e.g., maintaining a checking or savings account or obtaining a loan.
Board of Governors
The Federal Reserve's governing and monetary policy-making body; consists of seven governors appointed by the President to staggered 14-year terms.
A certificate of indebtedness issued by a government or a publicly held corporation, promising to repay borrowed money to the lender at a fixed rate of interest and at a specified time.
To receive and use something belonging to somebody else, with the intention of returning or repaying it--often with interest in the case of borrowed money.
Central Banking System
A nation's central bank that is established to regulate the money supply and oversee the nation's banks. In the United States the Federal Reserve is the central bank.
A written order to a financial institution directing the financial institution to pay a stated amount of money, as instructed, from the customer's account.
People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services.
Spending by households on goods and services. The process of buying and using goods and services.
The opportunity to borrow money or to receive goods or services in return for a promise to pay later.
Money owed to someone else. Also the state or condition of owing money. Can be individual, corporate or government debt.
The quantity of a good or service that buyers are willing and able to buy at all possible prices during a period of time.
A severe, prolonged economic contraction.
The interest rate the Federal Reserve charges commercial banks for loans.
The amount of money a person has left to save or spend after income taxes, Social Security taxes and other required deductions have been taken out of his or her pay.
An increase in real output as measured by real GDP or per capita real GDP.
The study of how people, firms and societies choose to allocate scarce resources with alternative uses.
The central bank of the United States. Its main function is controlling the money supply through monetary policy. The Federal Reserve System divides the country into 12 districts, each with its own Federal Reserve bank. Each district bank is directed by its nine-person board of directors. The Board of Governors, which is made up of seven members appointed by the President and confirmed by the Senate to 14-year terms, directs the nation's monetary policy and the overall activities of the Federal Reserve. The Federal Open Market Committee is the official policy-making body; it is made up of the members of the Board of Governors and five of the district bank presidents.
Economic units that demand productive resources from households and supply goods and services to households and government agencies.
Changes in the expenditures or tax revenues of the federal government, undertaken to promote full employment, price stability and reasonable rates of economic growth.
Tangible objects that satisfy economic wants.
Spending by all levels of government on goods and services; includes categories like military, schools and roads.
Individuals and family units that buy goods and services (as consumers) and sell or rent productive resources (as resource owners).
Any reward or benefit, such as money, advantage or good feeling, that motivates people to do something.
Payments earned by households for selling or renting their productive resources. May include salaries, wages, interest and dividends.
A rise in the general or average price level of all the goods and services produced in an economy. Can be caused by pressure from the demand side of the market (demand-pull inflation) or pressure from the supply side of the market (cost-push inflation).
Money paid regularly, at a particular rate, for the use of borrowed money.
The price paid for using someone else's money, expressed as a percentage of the amount borrowed.
The macroeconomic theory holding that business cycles are caused by changes in aggregate demand and that such cycles can and should be influenced by fiscal and monetary policy undertaken to promote economic stability.
Changes in the supply of money and the availability of credit initiated by a nation's central bank to promote price stability, full employment and reasonable rates of economic growth.
Anything that is generally accepted as final payment for goods and services; serves as a medium of exchange, a store of value and a standard of value. Characteristics of money are portability, stability in value, uniformity, durability and acceptance.
Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.
The total amount owed by the national government to those from whom it has borrowed to finance the accumulated difference between annual budget deficits and annual budget surpluses; also called public debt.
Open Market Operations
The buying and selling of government bonds by the Federal Reserve to control bank reserves and the money supply.
A process of manufacturing, growing, designing, or otherwise using productive resources to create goods or services used to to satisfy a want.
In a credit arrangement, the total amount spent during the billing cycle.
A decline in the rate of national economic activity, usually measured by a decline in real GDP for at least two consecutive quarters (i.e., six months).
The chance of losing money.
To keep money for future use; to divert money from current spending to a savings account or another form of investment.
Money set aside for a future use that is held in easily-accessed accounts, such as savings accounts and certificates of deposit (CDs).
Activities performed by people, firms or government agencies to satisfy economic wants.
Use money now to buy goods and services.
The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time. Normally, as the price of a good or service rises (or falls), the quantity supplied of the good or service rises (or falls).
Compulsory payments to governments by households and businesses.
The number of people without jobs who are actively seeking work.
The number of unemployed people, expressed as a percentage of the labor force.
Effort applied to achieve a purpose or result, often for pay; skills and knowledge put to use to get something done; employment at a job or in a position; occupation, profession, business, trade, craft, etc.
People employed to do work, producing goods and services.