Core Inflation, Monetary Policy, and Economic Growth

These flashcards cover key concepts related to inflation rates, monetary and fiscal policies, GDP measures, and their effects on the economy.

Core Inflation Rate

The measure of inflation that excludes volatile categories such as food and energy to show the underlying trend in prices.

Real Wage

The purchasing power of income after accounting for inflation, calculated as nominal wage divided by the CPI.

Real Interest Rate

The interest rate that reflects the true cost of borrowing or return on saving, calculated as nominal interest rate minus inflation rate.

Monetary Policy

A set of actions a bank takes to influence the economy by controlling the money supply, short-term interest rates, and availability of credit.

Dual Mandate

The Federal Reserve’s goals of maximizing employment and stabilizing prices.

Inflation

The general increase in prices and fall in the purchasing value of money.

Rule of 70

A formula used to estimate the number of years required to double the value of an investment at a fixed annual rate of return.

Nominal GDP

The total market value of all final goods and services produced within a country during a specific period using current prices.

Real GDP

The total value of all final goods and services produced within a country in a given year, adjusted for inflation using constant prices.

Fiscal Policy

The use of government spending and taxation to influence a country's economy and manage economic growth, unemployment, and inflation.

CPI (Consumer Price Index)

A measure that examines the average change in prices of a fixed basket of goods and services purchased by urban consumers over time.

GDP Deflator

A measure of changes in the average price level of all goods and services in a country's GDP, calculated as nominal GDP divided by real GDP times 100.

PCE Price Index

Measures the average change in prices for goods and services purchased by consumers in the U.S., including both headline (all items) and core (excluding volatile items) categories.