Glossary Terms:

Focus on Economic Data: The Federal Reserve and Monetary Policy, March 20, 2013

Glossary terms from:




Something of monetary value owned by an individual or an organization.


A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.

Bank Reserves

The percentage of a bank's deposits that it keeps on hand, i.e., does not lend out.


The industry involved with conducting financial transactions. Also, conducting business with a bank, e.g., maintaining a checking or savings account or obtaining a loan.


To receive and use something belonging to somebody else, with the intention of returning or repaying it--often with interest in the case of borrowed money.



Business Cycles







Spending by households on goods and services. The process of buying and using goods and services.


The opportunity to borrow money or to receive goods or services in return for a promise to pay later.




A conclusion reached after considering alternatives and their results.




Money put into a financial account. Also, to place money in a financial account.

Discount Rate

The interest rate the Federal Reserve charges commercial banks for loans.


A share of a company's net profits paid to stockholders.

Economic Growth

An increase in real output as measured by real GDP or per capita real GDP.


The study of how people, firms and societies choose to allocate scarce resources with alternative uses.

Federal Reserve



Economic units that demand productive resources from households and supply goods and services to households and government agencies.

Fiscal Policy

Changes in the expenditures or tax revenues of the federal government, undertaken to promote full employment, price stability and reasonable rates of economic growth.

Full Employment

The natural rate of employment; generally considered to be about 93-95 percent of the labor force, allowing for frictional unemployment of 5-7 percent.




Individuals and family units that buy goods and services (as consumers) and sell or rent productive resources (as resource owners).


Accommodation in houses, apartments, etc.





Interest Rate

The price paid for using someone else's money, expressed as a percentage of the amount borrowed.







Labor Market

The labor supply and labor demand curves. The intersection of the labor supply and labor demand curves determines the equilibrium wage and the quantity of hours people work at this equilibrium wage.


To grant someone the use of something, on condition that the object borrowed or its equivalent will be returned (often with interest, in the case of money).


The ease with which savings or investments can be turned into cash.


Places, institutions or technological arrangements where or by means of which goods or services are exchanged. Also, the set of all sale and purchase transactions that affect the price of some good or service.

Monetary Policy

Changes in the supply of money and the availability of credit initiated by a nation's central bank to promote price stability, full employment and reasonable rates of economic growth.



Money Supply

Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.


A special type of loan for the purchase of a house or other real estate.

Open Market Operations

The buying and selling of government bonds by the Federal Reserve to control bank reserves and the money supply.



Price Level

The weighted average of the prices of all goods and services in an economy; used to calculate inflation.

Price Stability

The absence of inflation or deflation; a broad social goal and criterion for measuring the performance of an economic system.


An original amount of money invested or lent.




In a credit arrangement, the total amount spent during the billing cycle.


A decline in the rate of national economic activity, usually measured by a decline in real GDP for at least two consecutive quarters (i.e., six months).



Reserve Requirements

The fraction of banks' deposits that they are required by law to keep on hand or with the Federal Reserve.




Earnings from an investment, usually expressed as an annual percentage.








The situation that results when the quantity supplied of a product exceeds the quantity demanded. Generally happens because the price of the product is above the market equilibrium price.


The number of people without jobs who are actively seeking work.

Unemployment Rate
