Chapter 5: Monetary Policy

Leading Economic Indicators

Economic indicators that tend to rise or fall a few months before business-cycle expansions and contractions.

Coincident Economic Indicators

Economic indicators that tend to reach their peaks and troughs at the same time as business cycles.

Lagging Economic Indicators

Economic indicators that tend to rise or fall a few months after business-cycle expansions and contractions.

The Conference Board

An independent, not-for-profit, membership organization whose stated goal is to create and disseminate knowledge about management and the marketplace to help businesses strengthen their performance and better serve society. It conducts research, convenes conferences, makes forecasts, assesses trends, and publishes information and analyses.

Producer Price Index

Reflects prices at the wholesale level.

Consumer Price Index

Reflects prices paid by consumers (retail level).

Personal Consumption Expenditures Index

Measures a wide range of household spending.

Demand-Pull Inflation

Inflation caused by excess demand for goods.

Theory of Rational Expectations

To the extent that businesses and households recognize that an increase in money supply growth will cause higher inflation, they will revise their inflationary expectations upward as a result.

Recognition Lag

The lag between the time a problem arises and the time it is recognized.

Implementation Lag

Lag time between when the government recognizes a problem and when it implements a policy to resolve the problem.

Impact Lag

The lag time between when a policy is implemented by the government and when the policy has an effect on the economy.

Global Crowding Out

Given the international integration of money and capital markets, a government’s budget deficit can affect interest rates in various countries.