Module 22-23 Flashcards
The price, calculated as a percentage of the amount borrowed, changed by lenders to borrowers for the use of their savings for one year.
Interest rate
Savings and investment spending are always equal for the economy as a whole
Savings-Investment Spending Identity
The difference between tax revenue and government spending when tax revenue exceeds government spending
Budget Surplus
The difference between tax revenue and government spending when government spending exceeds tax revenue
Budget Deficit
The difference between tax revenue and government spending
Budget balance
The sum of private savings in the budget balance, it is the total amount of savings generated within the economy
National savings
Equal to the total inflow of foreign funds minus the total outflow of domestic funds to other countries
Capital inflow
Of a household, is the value of its accumulated savings
Wealth
A paper claim that entitles the buyer to future income from the seller
Financial asset
A claim on a tangible object that gives the owner the right to dispose the object as he or she wishes
Physical asset
A requirement to pay money in the future
Liability
The expenses of negotiating and executing a deal
Transaction costs
Uncertainty about future outcomes that involve financial losses and gains
Financial risk
Individual engages in this by investing in several different assets with unrelated risks
Diversification
Asset is this if it can be quickly converted into cash without much loss of value
Liquid
Asset is this if cannot be converted into cash without much loss of value
Illiquid
A lending agreement between an individual lender and an individual borrower
Loan
Occurs when a borrower fails to make payments as specified by the loan or bond contract
Default
An asset created by polling individual loans and selling shares in that pool
Loan-backed security
An institution that transforms the funds it gathers from many individuals into financial assets
Financial intermediary
A financial intermediary that creates a stock portfolio and then resells shares of this portfolio to individual investors
Mutual fund
A nonprofit institution that invests the savings of members and provides then with income when they retire
Pension fund
Sells policies that guarantees a payment to a policyholder’s beneficiaries when the policyholder dies
Life Insurance Company
A claim on a bank that obliges the bank to give the depositor his or her cash when demanded
Bank deposit
A financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance borrower’s investment spending on illiquid assets
Bank
Any asset that can easily be used to purchase goods and services
Money
Cash held by the public
Currency in circulation
Bank accounts on which people can write checks
Checkable bank deposits
The total value of financial assets in the economy that are considered money
Money supply
An asset that an individual acquires for the purpose of trading for goods and services rather than for their own consumption
Medium of exchange
A means of holding purchasing power overt time
Store value
A measure used to set prices and make economic caluculations
Unit of account
A good used as a medium of exchange that has intrinsic value in other ways
Commodity money
A medium of exchange with no intrinsic value is guaranteed by a promise that it can be converted into valuable goods
Commodity-backed money
A medium of exchange whose value derives entirely from its official status as a means of payment
Fiat money
An overall measure of the money supply
Monetary aggregate
Financial assets that can’t be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits
Near-moneys
