Classical model of the price level Inflation tax Short-run Phillips curve Nonaccelerating inflation rate of unemployment (NAIRU) Long-run Phillips curve Debt deflation Zero bound Liquidity trap Maturity transformation Shadow bank Banking crisis Asset bubble Financial contagion Financial panic Credit crunch Debt overhang Lender of last resort | a situation in which monetary policy is ineffective because nominal interest rates are up against the zero bound. a graphical representation of the relationship between unemployment and inflation in the long run after expectations of inflation have had time to adjust to experience. the reduction in the value of money held by the public caused by inflation. the reduction in aggregate demand arising from the increase in the real burden of outstanding debt caused by deflation; occurs because borrowers, whose real debt rises as a result of deflation, are likely to cut spending sharply, and lenders, whose real assets are now more valuable, are less likely to increase spending. the lower bound of zero on the nominal interest rate. the unemployment rate at which, other things equal, inflation does not change over time. a phenomenon in which the price of a particular good or service is pushed to an unreasonably high level due to expectations of further price gains. the conversion of short-term liabilities into long-term assets. an episode in which a large part of the depository banking sector or the shadow banking sector fails or threatens to fail. an institution, usually a country’s central bank, that provides funds to financial institutions when they are unable to borrow from the private credit markets. a graphical representation of the negative short-run relationship between the unemployment rate and the inflation rate. a sudden and widespread disruption of the financial markets that occurs when people lose faith in the liquidity of financial institutions and markets. a nondepository financial institution that engages in maturity transformation. a model of the price level in which the real quantity of money is always at its long-run equilibrium level. This model ignores the distinction between the short run and the long run but is useful for analyzing the case of high inflation. a vicious downward spiral among depository banks as well as shadow banks: each institution’s failure increases the likelihood that another will fail. high debt but diminished assets, resulting from a vicious cycle of deleveraging. a time during which potential borrowers either can’t get credit at all or must pay very high interest rates. |
Classical model of the price level
Inflation tax
Short-run Phillips curve
Nonaccelerating inflation rate of unemployment (NAIRU)
Long-run Phillips curve
Debt deflation
Zero bound
Liquidity trap
Maturity transformation
Shadow bank
Banking crisis
Asset bubble
Financial contagion
Financial panic
Credit crunch
Debt overhang
Lender of last resort