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BANK/ECON > EXAM 1 > Flashcards

EXAM 1 Flashcards

(80 cards)

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1
Q

Costs associated with making a loan.

A

Transaction costs

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2
Q

Where funds are transferred from people and firms who have an excess of available funds to firms and people who have a need of funding.

A

Financial markets (Financial intermediation)

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3
Q

Anything that can be used to store wealth.

A

Asset

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4
Q

A claim on the issuer’s future income or assets.

A

Security (Financial Instrument)

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5
Q

A debt security that promises to make periodic payments for a specified time and then return principle.

A

Bond

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6
Q

Cost of borrowing or the price paid for the rental of money.

A

Interest rate

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7
Q

Represents a share of ownership in a corporation and that conveys voting rights in electing the corporate BOD.

A

Common stock

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8
Q

Shares of stock that have no voting rights, like bonds.

A

Preferred stock

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9
Q

The more liquid a market, the easier it is to buy and sell.

A

Ceteris Poribus

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10
Q

Institutions that borrow funds from people who have saved and make loans to other people.

A

Financial intermediaries

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11
Q

The development of new financial products and services.

  • Banks
  • Insurance companies
  • Finance companies
  • Pension funds
  • Mutual funds
A

Financial Innovation

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12
Q

The average price of goods and services in an economy. A measure of average prices in the economy.

A

Aggregate price level

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13
Q

The continual rise in the price level.

A

Inflation

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14
Q

The management of money supply and interest rates.

A

Monetary policy

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15
Q

The management of government spending and taxation.

A

Fiscal policy

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16
Q

Excess of expenditures over revenues.

A

Budget deficit

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17
Q

Excess of revenues over expenditures.

A

Budget surplus

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18
Q

When the government defaults on its debts by not paying.

A

“Hard” default

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19
Q

When the government prints money to pay off debt.

A

“Soft” default

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20
Q

Price at which the exchange occurs. If the exchange rate rises, the value of the domestic currency falls. If the exchange rate falls, the value of the domestic currency rises.

A

Exchange rate

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21
Q

The market value of all final goods and services produced in a country.

A

GDP

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22
Q

Total income of factors of production (land, labor, and capital) from producing goods and services in the economy during the course of the year. Equal to aggregate output.

A

Aggregate income

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23
Q

This indicates that causes are measured using current prices.

A

Nominal

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24
Q

What is the arbitrary base year for real GDP?

A

2005

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25
This indicates that values are measured in terms of fixed prices. Constant prices.
Real
26
Nominal GDP/ Real GDP = ?
Implicit GDP deflator
27
What are the 3 measures used to find aggregate pricing?
1. GDP deflator 2. PCE deflator (preferred by the Fed) 3. Consumer price index (CPI) (determined by the Bureau of Labor Statistics)
28
Nominal quantities * base year prices = ?
Real GDP
29
A measure of the price level, calculated by dividing nominal GDP by real GDP.
GDP deflator
30
The exchange of funds from saver to borrower directly.
Direct finance
31
When an intermediary facilitates the exchange of funds.
Indirect finance
32
Claim on assets and income of the issuer and traded as bills, notes, and bonds.
Debt
33
Ownership interest in a company and is traded like stocks. Residual claim on the assets and income of the issuer.
Equity
34
(Asset life) Less than 1 year
Short-term
35
(Asset life) 1 to 10 years
Intermediate-term
36
(Asset life) Over 10 years
Long-term
37
Banks that underwrite securities in primary markets.
Investment banks
38
Valuing and underlying assets and selling all the securities associated with the offering.
Underwriting
39
Dealer's offer to pay = ?
Bid price
40
Dealer's offer to sell = ?
Ask price
41
Exchange is centralized or decentralized?
Centralized
42
OTC (over-the-counter) is centralized or decentralized?
Decentralized
43
A certificate of deposit that is a bank deposit with a specific maturity.
Negotiable CD
44
An unsecured, short-term debt instrument issued by a corporation, for financing current receivables/payables. Usually mature up to 270 days.
Commercial paper
45
Overnight borrowings of reserves between banks and other entities to maintain their bank reserves for the Federal Reserve.
Federal funds
46
Type of security that signifies ownership in a corporation and represents a claim on a part of the corporation's assets and earnings.
Corporate stocks.
47
A loan that uses real estate as collateral.
Residential mortgages
48
A debt security issued by a corporation.
Corporate bonds
49
Medium-term (treasury notes) and long-term (treasury bonds) issued by the U.S. treasury; coupon bonds.
U.S. Treasury securities
50
Debt obligations that are issued by U.S. government-sponsored entities. (FNMA, FHLB, and SLMA)
U.S. Government Agency securities
51
A municipal bond that is a debt security issued by a state, municipality, or county to finance capital expenditures.
State and local government bonds
52
A commercial loan that is a debt-based funding arrangement between a business and a financial institute.
Bank commercial loans
53
A loan with fixed terms, issued by a bank that may be used for any purpose.
Consumer loans
54
Mortgage loan for income-earning properties.
Commercial and Farm mortgages
55
Bonds sold in a foreign country and denominated in that countries currency.
Foreign bonds
56
Bonds denominated in a currency other than that of the country in which it is sold.
Eurobond
57
Foreign currencies deposited in banks outside the home country.
Euro currencies
58
The cost advantage that arises with increased output of a product. (Relationship between the quantity produced and per-unit fixed costs)
Economies of scale
59
Financial intermediaries can pool the resources of their depositors and thereby create a more diverse portfolio of assets, which in turn reduces the overall risk to depositors.
Risk reduction
60
The FDIC insures $______ for each depositor at a bank.
250,000
61
Before transactions, institutes try to avoid selecting risky borrowers.
Adverse selection
62
After transactions, institutes ensure the borrower will not engage in activities that will prevent them from repaying their loan.
Moral hazard
63
Secondary markets make financial instruments more _____.
Liquid
64
40 or so dealers establish a market in securities by standing ready to buy and sell..... ?
U.S. government bonds
65
Why is there growth in foreign financial markets?
An increase in the pool of savings in foreign countries
66
Anything that is generally accepted as payment for goods or services or in the repayment of debts.
Money
67
Total collection of pieces of property that serve to store value.
Wealth
68
Eliminates the trouble of finding a double coincidence of needs; promotes specialization.
Medium of exchange.
69
What are the 5 requirements to be considered a medium of change?
1. Easily standardized 2. Widely accepted 3. Divisible 4. Easy to carry 5. Won't deteriorate quickly
70
Used to measure value in the economy; reduces transition costs.
Unit of account
71
Used to save purchasing power over time, assets serve this function.
Store of value
72
Valuable, easily standardized, and divisible commodities. (ex: Precious metals, cigarettes)
Commodity money
73
Paper money decreed by the government as legal tender.
Fiat money
74
An instruction to your bank to transfer money from your account.
Check/s
75
Online payment of bills.
Electronic payment
76
Debit card, stored-value card, e-cash.
E-money
77
Created by decentralized users in 2009. Functions as a medium of exchange, but less effective.
Bitcoin
78
Most liquid assets. Currency + Traveler's checks + demand deposits and other checkable deposits
M1 money supply
79
Aggregate money supply, but not as liquid. Small-denomination time deposits + savings deposits and money market deposit accounts + money market mutual funds.
M2 money supply
80
Inflation subjects savings to _____.
Risks

BANK/ECON (5 decks)

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