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.

KEY TERMS

Question

Keynesian economics
Macroeconomic policy activism
Monetarism
Discretionary monetary policy
Monetary policy rule
Velocity of money
Natural rate hypothesis
Political business cycle
New classical macroeconomics
Rational expectations
Rational expectations model
New Keynesian economics
Real business cycle theory
Great Moderation
Great Moderation consensus
a formula that determines the central bank’s actions.
a school of thought emerging out of the works of John Maynard Keynes; according to Keynesian economics, a depressed economy is the result of inadequate spending and government intervention can help a depressed economy through monetary policy and fiscal policy.
a theory of business cycles that asserts that fluctuations in the growth rate of total factor productivity cause the business cycle.
a belief in monetary policy as the main tool of stabilization combined with skepticism toward the use of fiscal policy and an acknowledgment of the policy constraints imposed by the natural rate of unemployment and the political business cycle.
a theory of business cycles, associated primarily with Milton Friedman, that asserts that GDP will grow steadily if the money supply grows steadily.
a model of the economy in which expected changes in monetary policy have no effect on unemployment and output and only affect the price level.
a business cycle that results from the use of macroeconomic policy to serve political ends.
the period from 1985 to 2007 when the U.S. economy experienced small fluctuations and low inflation.
the ratio of nominal GDP to the money supply.
policy actions, either changes in interest rates or changes in the money supply, undertaken by the central bank based on its assessment of the state of the economy.
a theory of expectation formation that holds that individuals and firms make decisions optimally, using all available information.
the hypothesis that because inflation is eventually embedded into expectations, to avoid accelerating inflation over time the unemployment rate must be high enough that the actual inflation rate equals the expected inflation rate.
an approach to the business cycle that returns to the classical view that shifts in the aggregate demand curve affect only the aggregate price level, not aggregate output.
a theory that argues that market imperfections can lead to price stickiness for the economy as a whole.
the use of monetary policy and fiscal policy to smooth out the business cycle.