Federal Reserve Challenge Master Vocabulary Guide

Vocabulary and economic concepts related to the Federal Reserve and macroeconomic indicators.

Economy

System where people produce, earn, spend, save, borrow, and invest.

GDP

Value of all final goods and services produced.

Real GDP

GDP adjusted for inflation.

Potential GDP

Sustainable output.

Output Gap

Difference between actual and potential GDP.

Inflation

Overall prices keep rising.

Disinflation

Inflation slows but prices still rise.

Deflation

Overall prices fall.

PCE

Fed's preferred inflation measure.

Core PCE

PCE excluding food and energy.

Labor Force

Employed plus unemployed looking for work.

Unemployment Rate

Unemployed divided by labor force.

LFPR

Share of population working or looking.

Productivity

Output per hour worked.

Federal Reserve

America's central bank.

FOMC

Committee that sets interest rates.

Dual Mandate

Maximum employment and stable prices.

Federal Funds Rate

Fed's main policy interest rate.

Rate Hike

Increase interest rates.

Rate Cut

Lower interest rates.

Restrictive Policy

Slows demand to reduce inflation.

Accommodative Policy

Supports demand and employment.

Financial Conditions

Overall ease of borrowing and investing.

QE

Fed buys securities to lower long-term rates.

QT

Fed shrinks its balance sheet.

Phillips Curve

Labor tightness may increase inflation.

Beveridge Curve

Relationship between unemployment and job openings.

Data Dependence

Policy changes based on incoming data.