Module 22-23

Question 1

The price, calculated as a percentage of the amount borrowed, changed by lenders to borrowers for the use of their savings for one year.

Answer 1

Interest rate

Question 2

Savings and investment spending are always equal for the economy as a whole

Answer 2

Savings-Investment Spending Identity

Question 3

The difference between tax revenue and government spending when tax revenue exceeds government spending

Answer 3

Budget Surplus

Question 4

The difference between tax revenue and government spending when government spending exceeds tax revenue

Answer 4

Budget Deficit

Question 5

The difference between tax revenue and government spending

Answer 5

Budget balance

Question 6

The sum of private savings in the budget balance, it is the total amount of savings generated within the economy

Answer 6

National savings

Question 7

Equal to the total inflow of foreign funds minus the total outflow of domestic funds to other countries

Answer 7

Capital inflow

Question 8

Of a household, is the value of its accumulated savings

Answer 8

Wealth

Question 9

A paper claim that entitles the buyer to future income from the seller

Answer 9

Financial asset

Question 10

A claim on a tangible object that gives the owner the right to dispose the object as he or she wishes

Answer 10

Physical asset

Question 11

A requirement to pay money in the future

Answer 11

Liability

Question 12

The expenses of negotiating and executing a deal

Answer 12

Transaction costs

Question 13

Uncertainty about future outcomes that involve financial losses and gains

Answer 13

Financial risk

Question 14

Individual engages in this by investing in several different assets with unrelated risks

Answer 14

Diversification

Question 15

Asset is this if it can be quickly converted into cash without much loss of value

Answer 15

Liquid

Question 16

Asset is this if cannot be converted into cash without much loss of value

Answer 16

Illiquid

Question 17

A lending agreement between an individual lender and an individual borrower

Answer 17

Loan

Question 18

Occurs when a borrower fails to make payments as specified by the loan or bond contract

Answer 18

Default

Question 19

An asset created by polling individual loans and selling shares in that pool

Answer 19

Loan-backed security

Question 20

An institution that transforms the funds it gathers from many individuals into financial assets

Answer 20

Financial intermediary

Question 21

A financial intermediary that creates a stock portfolio and then resells shares of this portfolio to individual investors

Answer 21

Mutual fund

Question 22

A nonprofit institution that invests the savings of members and provides then with income when they retire

Answer 22

Pension fund

Question 23

Sells policies that guarantees a payment to a policyholder’s beneficiaries when the policyholder dies

Answer 23

Life Insurance Company

Question 24

A claim on a bank that obliges the bank to give the depositor his or her cash when demanded

Answer 24

Bank deposit

Question 25

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

Answer 25

Bank

Question 26

Any asset that can easily be used to purchase goods and services

Answer 26

Money

Question 27

Cash held by the public

Answer 27

Currency in circulation

Question 28

Bank accounts on which people can write checks

Answer 28

Checkable bank deposits

Question 29

The total value of financial assets in the economy that are considered money

Answer 29

Money supply

Question 30

An asset that an individual acquires for the purpose of trading for goods and services rather than for their own consumption

Answer 30

Medium of exchange

Question 31

A means of holding purchasing power overt time

Answer 31

Store value

Question 32

A measure used to set prices and make economic caluculations

Answer 32

Unit of account

Question 33

A good used as a medium of exchange that has intrinsic value in other ways

Answer 33

Commodity money

Question 34

A medium of exchange with no intrinsic value is guaranteed by a promise that it can be converted into valuable goods

Answer 34

Commodity-backed money

Question 35

A medium of exchange whose value derives entirely from its official status as a means of payment

Answer 35

Fiat money

Question 36

An overall measure of the money supply

Answer 36

Monetary aggregate

Question 37

Financial assets that can't be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits

Answer 37

Near-moneys