Key Terms

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.

Question

Short-term interest rates
Long-term interest rates
Money demand curve
Liquidity preference model of the interest rate
Money supply curve
Target federal funds rate
Contractionary monetary policy
Taylor rule for monetary policy
Inflation targeting
Zero lower bound for interest rates
Monetary neutrality
the interest rate on financial assets that mature within less than a year
the interest rate on financial assets that mature a number of years into the future
a graphical representation of the relationship between the quantity of money supplied by the Federal Reserve and the interest rate
a model of the market for money in which the interest rate is determined by the supply and demand for money
a rule for setting the federal funds rate that takes into account both the inflation rate and the output gap
an approach to monetary policy that requires that the central bank try to keep the inflation rate near a predetermined target rate
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
statement of the fact that interest rates cannot fall below zero
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 Federal Reserve’s desired level for the federal funds rate. The Federal Reserve adjusts the money supply through the purchase and sale of Treasury bills until the actual rate equals the desired rate
monetary policy that, through the raising of the interest rate, reduces aggregate demand and therefore output

Short-term interest rates, p. 519

Long-term interest rates, p. 519

Money demand curve, p. 520

Liquidity preference model of the interest rate, p. 524

Money supply curve, p. 524

Target federal funds rate, p. 525

Expansionary monetary policy, p. 528

Contractionary monetary policy, p. 528

Taylor rule for monetary policy, p. 529

Inflation targeting, p. 530

Zero lower bound for interest rates, p. 532

Monetary neutrality, p. 535