Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
Expansionary monetary policy Contractionary monetary policy Monetary transmission mechanism Zero lower bound for interest rates Money supply curve Long-term interest rates Short-term interest rates Quantitative easing (QE) Money demand curve Monetary neutrality Liquidity preference model of the interest rate Inflation targeting Non-monetary assets | the interest rate on financial assets that mature within less than a year. the concept that changes in the money supply have no real effects on the economy in the long run and only result in a proportional change in the price level. assets that are not made up of money, nor function as money. an approach to monetary policy that requires that the central bank try to keep the inflation rate near a predetermined target rate. a model of the market for money in which the interest rate is determined by the supply and demand for money. statement of the fact that interest rates cannot fall below zero. the interest rate on financial assets that mature a number of years into the future. a monetary policy in which a government tries to drive down interest rates, thus exerting an expansionary effect on the economy, by buying longer-term government bonds, instead of the shorter-term bonds it would buy usually. monetary policy that, through the raising of the interest rate, reduces aggregate demand and therefore output. monetary policy that, through the lowering of the interest rate, increases aggregate demand and therefore output. a graphical representation of the relationship between the quantity of money supplied and the interest rate. a graphical representation of the relationship between the interest rate and the quantity of money demanded. The money demand curve slopes downward because, other things equal, a higher interest rate increases the opportunity cost of holding money. the channels through which a change in interest rates (or money supply) will cause a shift in the aggregate demand curve (and ultimately affect the economy’s output and inflation rate). |