Chapter 1 Flashcards
Security
a claim on the issuer’s future income or assets
Bond
a debt security that promises to make payments periodically for a specified period of time
Interest Rate
the cost of borrowing or the price paid for the rental of funds
Common Stock
a share of ownership in a corporation
Share of stock
a claim on the residual earnings and assets of the corporation
Financial Intermediaries
institutions that borrow funds from people who have saved and in turn make loans to other people
Banks
accept deposits and make loans
Financial innovation
the development of new financial products and services; Can be an important force for good by making the financial system more efficient
Financial crises
major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and nonfinancial firms
Aggregate price level
the average price of goods and services in an economy
Monetary policy
the management of the money supply and interest rates;
conducted in the U.S. by the Federal Reserve System (Fed)
Fiscal policy
deals with government spending and taxation
Foreign Exchange Market
where funds are converted from one currency into another
Foreign Exchange Rate
the price of one currency in terms of another currency
Gross domestic product (GDP)
the market value of all final goods and services produced in a country during the course of a year
