Monetary Policy - Lecture Notes

Vocabulary flashcards covering key concepts in monetary policy as presented in the lecture notes.

Monetary Transmission Mechanism

The process by which changes in the money supply affect real economic outcomes.

Inflation Targeting

A monetary policy where the central bank sets a specific inflation rate as its goal.

Endogenous Money Supply

A situation where the money supply is determined by the demand for it rather than by outside controls.

Interest Rate Targeting

The practice of the central bank aiming to influence market interest rates to achieve monetary policy goals.

Expansionary Monetary Policy

A policy that reduces interest rates and increases money supply to boost economic activity.

Contractionary Monetary Policy

A policy that raises interest rates and reduces money supply to slow down economic activity.

Open-Market Operations

The buying and selling of government securities by the central bank to influence the money supply.

Policy Interest Rate

The interest rate set by the central bank that influences other market interest rates.

Demand for Money Function

An economic concept that describes how much money people desire to hold at a given interest rate.

Cash-Deposit Allocation

The distribution of liquid cash versus deposit reserves held in banks.