Chapter 1 Flashcards
(27 cards)
Financial markets
markets in which funds are transferred from people who have an excess of available funds to people who have a shortage
Security
(financial instrument) a claim on the issuer’s future income or assets
Bond
debt security that promises to make periodic payments for a specified period of time
Interest rate
the cost of borrowing or the price paid for the rental of funds (usually expressed as a percentage)
Common stock
represents a share of ownership in a corporation, way of corporations to raise funds to finance their activities
Financial intermediaries
institutions that borrow funds from people who saved and in turn make loans to people who need funds
Banks
financial institutions that accept deposits and make loans
Financial innovation
the development of new financial products and services
E-finance
the ability to deliver financial services electronically
Financial crises
major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and non financial firms
Money (money supply)
anything that is generally accepted as payment for goods or services in the repayment of debts
Aggregate output
total production of goods and services
Unemployment rate
percentage of the available workforce unemployed
Business cycles
upward and downward movement of aggregate output produced in the economy
Recessions
periods of declining aggregate output
Monetary theory
theory that relates the quantity of money and monetary policy in aggregate economic activity and inflation
Aggregate price level
average prices of goods and services in an economy
Inflation
continual increase in the price level
Inflation rate
rate of change of the price level, usually measured as a percentage change per year
Monetary policy
the management of money and interest rates
Federal Reserve System
United States Central Bank that affects the quantity of money and interest rates in the economy
Fiscal policy
involves decisions about government spending and taxation
Budget deficit
an excess of government expenditures with respect to tax revenues
Budget surplus
arises when tax revenues exceed government expenditures
