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42 Cards in this Set
- Front
- Back
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Economic Growth
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Increases in skills and knowledge of the work force, as and or increases in quantity or quality of physical capital
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Interest Rate
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Price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year
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Savings-investment spending identity
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Savings and investment spending are always equal for the economy as a whole
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Budget Surplus
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The difference between tax revenue and government spending when tax revenue exceeds government spending
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National Savings
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Equal to the sum of private savings and the budget balance
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Private Savings
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Disposable income minus consumptions.
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Capital Inflows
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The net flow of funds into a country.
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Financial assets
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Financial markets are where households invest their current savings and their accumulated savings, or wealth, by purchasing financial assets.
It is also a paper claim that entitles the buyer to future income from the seller. |
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Physical asset
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A claim on a tangible object, such as a preexisting house or a preexisting piece of equipment.
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Liability
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Requirement to pay money in the future.
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Types of financial assets
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Loans
Stocks Bonds Bank Deposits |
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Tasks of a Financial System
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Transaction Costs
Reducing Risk Providing Liquidity |
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Transaction Costs
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The expenses of actually putting together and executing a deal.
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Bonds
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Allows companies to borrow large sums of money without incurring large transaction costs.
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Reducing Risk
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Uncertainty about future outcomes that involve financial losses and gains. Can be done through diversification
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Types of financial assets
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Loans
Stocks Bonds Bank Deposits |
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Tasks of a Financial System
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Transaction Costs
Reducing Risk Providing Liquidity |
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Transaction Costs
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The expenses of actually putting together and executing a deal.
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Bonds
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Allows companies to borrow large sums of money without incurring large transaction costs.
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Reducing Risk
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Uncertainty about future outcomes that involve financial losses and gains. Can be done through diversification
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Loan Backed Securities
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Assets created by pooling individual loans and selling shares in that pool
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Financial intermediary
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An institution that transforms funds gathered from many individuals into financial assets
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Mutual Fund
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A financial intermediary that creates a stock portfolio buy buying and selling shares of the stock portfolio to individual investors
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Money
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Money is any asset that can easily be used to purchase foods and services
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Currency in circulation
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The cash held by the public
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Money Supply
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The total value of financial assets in the economy that are considered money
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Medium of exchange
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An asset that individuals use to trade for goods and services rather than for consumption
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Store of value
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A means of holding purchasing power over time
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Unit of Account
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A measure used to set prices and makes economic calculations
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Commodity Money
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A good used as a medium of exchange that has intrinsic value in other uses
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Fiat Money
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A medium of exchange whose value derives entirely from its official status as a means of payment
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Bank Reserves
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Currency held in bank vaults or bank deposits held at the federal reserve
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Reserve Ratio
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The fraction of bank deposits that a bank holds as reserves
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Excess reserves
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A banks reserves over and above its required reserves
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Monetary Base
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The sum of currency in circulation and bank reserves
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Federal Reserve
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A central bank that decides how much money individual banks must reserve, and how large the monetary base will be.
Over sees and regulates the banking system and controls the monetary base. |
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Commercial bank
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Accepts deposits and is covered by deposit insurance
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Investment Bank
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Trades in financial assets and is not covered by deposit insurance
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Four function of the federal reserve
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Provide Financial Services
Supervise and regulate banking institutions Maintain the stability of the financial system Conduct Monetary Policy |
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Shifts in the Money Demand Curve
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Changes in the Aggregate Price Level
Changes in Real GDP Changes in Technology |
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Loanable funds Market
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A hypothetical market that illustrates the market outcome of the demand for funds generated by borrower and the supply of funds provided by lenders
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Real interest rate
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Nominal interest rate-Inflation Rate
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