Chapters 9 and 10 Vocabulary

Question 1

the market where savers supply loans to borrowers stock exchanges
- investment banks
- stock exchanges
- mutual fund firms
- commercial banks

Answer 1

loanable funds market

Question 2

creating a balance between spending and saving during the different phases of our lives to achieve a higher overall standard of living
- accomplished with the help of the loanable funds market

Answer 2

consumption smoothing

Question 3

when people withdraw funds from their previously accumulated savings
- later in life -

Answer 3

dissaving

Question 4

the anticipated rate of return based on the probabilities of all possible outcomes

Answer 4

expected return

Question 5

real interest rate = nominal interest rate - inflation rate

Answer 5

fisher equation

Question 6

a price of loanable funds

Answer 6

interest rate

Question 7

a measure of what firms expect for future economic activity
- animal spirits -

Answer 7

investor confidence

Question 8

the interest rate before it is corrected for inflation

Answer 8

nominal interest rate

Question 9

the interest rate after it is corrected for inflation

Answer 9

real interest rate

Question 10

a personal saving as a fraction of disposable (after-tax) income

Answer 10

savings rate

Question 11

the fact that people prefer to receive goods and services sooner rather than later
- strong = less patient -
- weak = more patient -

Answer 11

time preferences

Question 12

• income and wealth
• time preferences
• consumption smoothing

Answer 12

shifters of demand and supply of loanable funds

Question 13

firms that help to channel funds from savers to borrowers

Answer 13

financial intermediaries

Question 14

privately channel funds from savers to borrowers
- extended loans -

Answer 14

banks

Question 15

a security that represents a debt to be paid
- loan from company or government -

Answer 15

bond

Question 16

ownership of shares in a firm

Answer 16

stocks

Question 17

the risk that the borrower will not pay the face value of the bond at the maturity date

Answer 17

default risk

Question 18

when borrowers go directly to savers for funds

Answer 18

direct finance

Question 19

when savers lend funds to financial intermediaries, when then loan these finds to borrowers

Answer 19

indirect finance

Question 20

the bonds value at its maturity date
- about due at maturity date -

Answer 20

face/par value

Question 21

the date on which the loan repayment is due

Answer 21

maturity date

Question 22

markets in which securities are traded after their first sale

Answer 22

secondary markets

Question 23

the creation of a new security by combining otherwise separator loan agreements

Answer 23

securitization

Question 24

a traceable contract that entitles its owner to certain rights

Answer 24

security

Question 25

the bonds sold by the U.S. government to pay for the national dept

Answer 25

treasury securities