Macroeconomics

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G L O S S A R Y

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Income effect:

The change in consumption of a

good resulting from a movement to a higher or

lower indifference curve, holding the relative price

constant. (Cf. substitution effect.)

Index of leading indicators

: See leading indicators.

Indifference curves:

A graphical representation 

of preferences that shows different combinations of

goods producing the same level of satisfaction.

Inflation:

An increase in the overall level of prices.

(Cf. deflation, disinflation.)

Inflation targeting:

A monetary policy under

which the central bank announces a specific target,

or target range, for the inflation rate.

Inflation tax:

The revenue raised by the government

through the creation of money; also called seigniorage.

Inside lag:

The time between a shock hitting the

economy and the policy action taken to respond to

the shock. (Cf. outside lag.)

Insiders:

Workers who are already employed and

therefore have an influence on wage bargaining. (Cf.

outsiders.)

Interest rate:

The market price at which resources

are transferred between the present and the future;

the return to saving and the cost of borrowing.

Intermediation:

See financial intermediation.