The central bank of the United States, often called “the Fed,” responsible for monetary policy.
Federal Reserve
assets
Anything valuable that is owned, such as property, stocks, or bonds.
True or false: The Taylor principle says interest rates should rise more than inflation.
True
Financial strain on government budgets, often from high debt, spending, or falling revenues.
fiscal pressure
Define "interest rates"
The cost of borrowing money, expressed as a percentage of the amount borrowed.
True or false: Core inflation includes food and energy prices.
False (core inflation excludes food and energy)
A measure of inflation that excludes volatile items like food and energy, showing underlying price trends.
core inflation
A request submitted to a lender for a loan to buy real estate, including details of income, debt, and credit history.
mortgage application
An economic rule stating that central banks should raise interest rates by more than the increase in inflation to keep inflation under control.
Taylor principle
Fiscal adjustment
Changes in government spending or taxation aimed at reducing deficits and debt.
The theoretical interest rate at which the economy is balanced — neither boosting inflation nor slowing growth.
natural rate of interest
Income received by a government or business, often from taxes or sales.
revenue
Define "crush inflation"
To reduce or eliminate rapidly rising prices in the economy, usually by raising interest rates or tightening monetary policy.
The total amount a country owes to creditors, built up by borrowing over time.
national debt
Define "rate cuts"
Instances when a central bank lowers interest rates.
The state of owing money; the level of debt held by an individual, business, or country.
indebtedness
The supply of available workers and the demand for employees, determining wages, employment, and job opportunities.
labour market
The main financial authority of a country that manages monetary policy, issues currency, and regulates banks.
central bank
True or false: Public finances refer to the money management of private companies.
False (public finances = government money management)
Why do governments worry about indebtedness?
Because too much debt can limit future spending and cause crises.
Define "pension'
Regular payments made to retired people, usually funded by employers, governments, or workers’ contributions.
Define "inflation target"
The specific rate of inflation that a central bank aims to maintain for price stability.
The financial capacity of a government to increase spending or reduce taxes without jeopardizing its long-term fiscal sustainability or economic stability.
fiscal space
A period of economic decline, usually defined as two consecutive quarters of falling GDP.
recession
A medium of exchange used to buy goods and services, store value, and measure economic worth.
money
Define "tariff-driven inflation"
Rising prices caused by import tariffs (taxes on foreign goods), which make products more expensive.
Define "GDP"
Gross Domestic Product — the total value of all goods and services produced in a country in a given period.
True or false: A fiscal adjustment means increasing debt.
False (fiscal adjustment = reducing debt/deficits, not increasing them)
Define "cause a recession"
To trigger a period of economic decline marked by falling output, rising unemployment, and reduced spending.
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