aggregate demand curve  a line showing a negative relationship between inflation and the aggregate quantity of goods and services demanded at that inflation rate.
federal funds rate  the interest rate on overnight loans between banks that the Federal Reserve influences by changing the supply of funds (bank reserves) in the market.
inflation adjustment line  a flat line showing the level of inflation in the economy at a given point in time. It shifts up when real GDP is greater than potential GDP, and it shifts down when real GDP is less than potential GDP; it also shifts when expectations of inflation or raw materials prices change.
monetary policy rule  a description of how much the interest rate or other instruments of monetary policy respond to inflation or other measures of the state of the economy.
target inflation rate  the central bank’s goal for the average rate of inflation over the long run.