Term
| savings-investment spending identity |
|
Definition
| savings & investment spending are always equal for the economy as a whole |
|
|
Term
|
Definition
| the difference between tax revenue & government spending when tax revenue exceeds government spending |
|
|
Term
|
Definition
| the difference between tax revenue & government spending when government spending exceeds tax revenue |
|
|
Term
|
Definition
| the difference between tax revenue & government spending |
|
|
Term
|
Definition
| the sum of private savings & the budget balance; the total amount of savings generated within the economy |
|
|
Term
|
Definition
| the net inflow of funds into a country |
|
|
Term
|
Definition
| a hypothetical market that illustrates the market outcome of the demand for funds generated by borrowers & the supply of funds provided by lenders |
|
|
Term
|
Definition
| the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year |
|
|
Term
|
Definition
| the profit earned on the project expressed as a percentage of its cost |
|
|
Term
|
Definition
| when a government deficit drives up the interest rate & leads to reduced investment spending |
|
|
Term
|
Definition
| an increase in expected future inflation drives up the nominal interest rate, leaving the expected real interest rate unchanged |
|
|
Term
| according to the _____, savings is equal to investment spending for the economy as a whole |
|
Definition
| savings-investment spending identity |
|
|
Term
| the government is a source of savings when it runs a positive _____ |
|
Definition
|
|
Term
| the government is a source of dissavings when it runs a _____ |
|
Definition
|
|
Term
| savings is equal to _____ plus _____, which may be either positive or negative |
|
Definition
| national savings; capital inflow |
|
|
Term
| the hypothetical _____ matches savers to borrowers |
|
Definition
|
|
Term
| in equilibrium, only investment spending projects with a _____ greater than or equal to the equilibrium interest rate are funded |
|
Definition
|
|
Term
| because the government competes with private borrowers in the loanable funds market, a government deficit can cause _____ |
|
Definition
|
|
Term
| higher expected future inflation raises nominal interest rates through the _____ |
|
Definition
|
|
Term
|
Definition
| the value of its accumulated savings |
|
|
Term
|
Definition
| a paper claim that entitles the buyer to future income from the seller |
|
|
Term
|
Definition
| a claim on a tangible object that gives the owner the right to dispose of the object as he or she wishes |
|
|
Term
|
Definition
| a requirement to pay income in the future |
|
|
Term
|
Definition
| expenses of negotiating & executing a deal |
|
|
Term
|
Definition
| uncertainty about future outcomes that involve financial losses & gains |
|
|
Term
|
Definition
| when an individual invests in several different things so that the possible losses are independent events |
|
|
Term
|
Definition
| if an asset can be quickly converted into cash without much loss of value |
|
|
Term
|
Definition
| if an asset cannot be quickly converted into cash without much loss of value |
|
|
Term
|
Definition
| a lending agreement between an individual lender & an individual borrower |
|
|
Term
|
Definition
| when a borrower fails to make payments as specified by the loan or bond contract |
|
|
Term
|
Definition
| an asset created by pooling individual loans & selling shares in that pool |
|
|
Term
|
Definition
| an institution that transforms the funds it gathers from many individuals into financial assets |
|
|
Term
|
Definition
| a financial intermediary that creates a stock portfolio & then resells shares of this portfolio to individual investors |
|
|
Term
|
Definition
| a type of mutual fund that holds assets in order to provide retirement income to its members |
|
|
Term
|
Definition
| sells policies that guarantee a payment to the policy-holder's beneficiaries when the policy-holder dies |
|
|
Term
|
Definition
| a claim on a bank that obliges the bank to give the depositor his or her cash when demanded |
|
|
Term
|
Definition
| a financial intermediary that provides liquid assets in the form of bank deposits to lenders & uses those funds to finance the illiquid investment spending needs of borrowers |
|
|
Term
| households can invest their current savings or their _____ by purchasing either financial assets or physical assets |
|
Definition
|
|
Term
| a financial asset is a _____ from the point of view of its seller |
|
Definition
|
|
Term
| a well-functioning financial system reduces _____, reduces _____ by enabling diversification, & provides _____ assets, allowing investors to easily convert their holdings into cash, which investors prefer to illiquid assets |
|
Definition
| transaction costs; financial risk; liquid |
|
|
Term
| the four main types of financial assets are _____, bonds, stocks, & _____ |
|
Definition
|
|
Term
| a recent innovation is _____, which are more liquid & more diversified than individual loans |
|
Definition
|
|
Term
| bonds with a higher _____ risk typically must pay a higher interest rate |
|
Definition
|
|
Term
| the most important types of _____ are mutual funds, life insurance companies, pension funds, & banks |
|
Definition
|
|
Term
| efficient markets hypothesis |
|
Definition
| asset prices embody all publicly available information |
|
|
Term
|
Definition
| the movement over time of an unpredictable variable |
|
|
Term
| one view of expectations is the _____, which leads to the view that stock prices follow a random walk |
|
Definition
| efficient markets hypothesis |
|
|
