| A | B |
|---|
| Aggregate Demand Curve | A graphical depictions of the relationship between the level of desires expenditures in an economy and the price level |
| Aggregate Supply Curve | A graphical depiction of the relationship between the quantity of goods and services firms wish to supply the price level |
| Bank Run | A sudden rush of depositors seeking to withdraw funds from the banking system |
| Currency | Coins and bills in the hands of the public |
| Discount Rate | The interest rate that the Federal Reserve charges banks when they must borrow reserves from it |
| Federal funds rate | The rate that banks charge other banks when they lend reserves |
| Fiscal Policy | The use of taxes and spending to influence aggregate demand and through it the level of overall economic activity |
| Keynesian Model | A model of short-run aggregate economic flucuations inspired by the analysis of British economist John Maynard Keynes, which attributes short-run deviations in output from potential to variations in the level of aggregate demand or aggregate supply |
| Liquidity | The ease with which a nonmonetary asset may be converted into money |
| Monetary Base | The quantity of currency plus bank reserves |
| Monetary Policy | The use of the supply of money in the economy by the Federal Reserve to influence the level of aggregate demand |
| Money Multiplier | The ratio of the money supply to the monetary base |
| Money Supply | The quantity of money available to the economy |
| Natural Rate of Unemployment | The level of unemployment that would exist if the economy were producing at its potential output |
| Neutrality of money | The proposition that in the long run, changes in the quantity of money affect the price level but do not affect any real quantities |
| Okun's Law | A relationship identified by Arthur Okun between the output gap and the level of cyclical unemployment |
| Open Market Operations | A tool used by the Federal Reserve to adjust the money supply by buying or selling U.S. government bonds in the financial market |
| Output Gap | The difference between actual output and potential output |
| Potential output | The quantity of output that would be produced by an economy if all of its resources were being employed at normal rates |
| Reserve Requirement | The amount of reserves that the Federal Reserve requires banks to hold |
| Reserves | The fraction of deposit liabilities that banks hold to meet depositor withdrawals |
| Velocity of Money | The ratio of nominal GDP to the money supply; in effect, the average number of transactions supported by each dollar of the money supply |
