Inflation & Fed Word Search
Find 10 essential inflation and Federal Reserve terms. Click any word to learn how it affects your everyday financial life.
Economics Term
Find 10 essential inflation and Federal Reserve terms. Click any word to learn how it affects your everyday financial life.
Study these terms before or after solving the puzzle. Each definition includes a real-world US example.
Inflation is the rate at which the general level of prices for goods and services rises over time, eroding the purchasing power of money. Central banks like the Federal Reserve monitor inflation closely and adjust interest rates to keep it within a target range — typically around 2% annually for the US economy.
In 2022, US inflation hit 9.1% — the highest in 40 years — driven by pandemic supply chain disruptions and energy price spikes. The average American family spent an estimated $700 more per month on the same goods compared to 2021.
The Federal Reserve, commonly called
When the Fed raised its benchmark rate from near zero to over 5% between 2022 and 2023, mortgage rates doubled from around 3% to over 7%, significantly cooling the US housing market.
An interest rate is the cost of borrowing money, expressed as a percentage of the loan amount per year. The Federal Reserve sets the federal funds rate — the rate banks charge each other for overnight loans — which influences all other interest rates in the economy including mortgages, car loans, credit cards, and savings accounts.
When the Fed raised rates in 2022–2023, the average 30-year mortgage rate climbed from 3.1% to 7.8%, adding over $1,000 per month to a typical home purchase payment.
The Consumer Price Index is the most widely used measure of inflation in the United States, published monthly by the Bureau of Labor Statistics. It tracks the average change in prices paid by urban consumers for a representative basket of goods and services including food, housing, transportation, and medical care.
The June 2022 CPI reading of 9.1% year-over-year was the highest since November 1981. It reflected surging gasoline prices (+60%), groceries (+10%), and shelter costs (+5.6%) hitting American households simultaneously.
Deflation is a sustained decrease in the general price level of goods and services — the opposite of inflation. While lower prices sound beneficial, deflation is typically associated with reduced economic activity, rising unemployment, and increased debt burdens, as consumers delay purchases expecting prices to fall further.
Japan experienced prolonged deflation from the 1990s through the 2010s — a period known as the
Economic stimulus refers to government or central bank actions designed to boost economic activity during downturns. Fiscal stimulus involves government spending and tax cuts, while monetary stimulus includes interest rate cuts and quantitative easing. Both aim to increase consumer spending, business investment, and employment.
During COVID-19, the US government deployed over $5 trillion in stimulus including $1,200, $600, and $1,400 direct payments to Americans, plus expanded unemployment benefits and Paycheck Protection Program loans for businesses.
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months. It is typically defined as two consecutive quarters of negative GDP growth. Recessions are characterized by rising unemployment, reduced consumer spending, falling business profits, and declining investment.
The Great Recession of 2007–2009 wiped out 8.7 million US jobs and caused housing prices to fall 30% nationally. It was triggered by the collapse of the subprime mortgage market and the failure of major financial institutions.
Tapering refers to the gradual reduction of a central bank\
In November 2021, the Fed announced it would begin tapering its $120 billion monthly bond purchases by $15 billion per month. By March 2022, purchases had ended completely, paving the way for interest rate hikes.
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic goals like price stability, full employment, and sustainable economic growth. The Fed\
The Fed\
Stagflation is a rare and challenging economic condition combining high inflation, slow economic growth, and high unemployment simultaneously. It is particularly difficult to address because the standard cure for inflation — raising interest rates — can worsen unemployment and slow growth, creating a policy dilemma for central bankers.
The 1970s stagflation in the US was triggered by OPEC oil embargoes that caused energy prices to quadruple. Inflation reached 14.8% while unemployment exceeded 9%, forcing Fed Chair Paul Volcker to raise rates to 20% to break the cycle.