Econ modules 22-26 Word Scramble
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| Term | Definition |
| interest rate | the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year |
| savings-investment spending identity | an accounting fact that states that savings and investment spending are always equal for the economy as a whole |
| budget surplus | the difference between tax revenue and government spending when tax revenue exceeds government spending |
| budget deficit | the difference between tax revenue and government spending when government spending exceeds tax revenue |
| budget balance | the difference between tax revenue and government spending |
| National savings | the sum of private savings and the government's budget balance; the total amount of savings generated within the economy |
| Capital Inflow | the net inflow of funds int a country; the difference between the total inflow of foreign funds to the home country and the total outflow of domestic funds to other countries |
| wealth | the value of accumulated savings |
| financial asset | a paper claim that entitles the buyer to future income from the seller |
| physical asset | a claim on a tangible object that gives the owner the right to dispose of the object as he or she wishes |
| liability | a requirement to pay income in the future |
| Transaction costs | the expenses of negotiating and executing a deal |
| Financial risk | uncertainty about future outcomes that involve financial losses and gains |
| Diversification | investment in several different assets with unrelated, or independent, risks, so that the possible losses are independent events |
| Liquid | describes an asset that can be quickly converted into cash without much loss of value |
| illiquid | describes an asset that cannot be quickly converted into cash without much loss of value |
| Loan | a lending agreement between an individual lender and an individual borrower |
| Default | when a borrower fails to make payments as specified by the bond contract |
| loan-backed security | assets created by pooling individual loans and selling shares in that pool |
| financial intermediary | an institution, such as a mutual fund, pension fund, life insurance company, or bank that transforms the funds it gathers from many individuals into financial assets |
| mutual fund | a financial intermediary that creates a stock portfolio by buying and holding shares in companies and then selling shares of this portfolio to individual investors |
| pension fund | a type of mutual fund that holds assets in order to provide retirement income to its members |
| life insurance policy | a financial intermediary that sells policies guaranteeing a payment to a policyholder's beneficiaries when the policyholder dies |
| bank deposit | a claim on a bank that obliges the bank to give the depositor his or her cash when demanded |
| bank | a financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance the illiquid investments or investment spending needs of borrowers |
| money | any asset that can easily be used to purchase goods and services |
| currency in circulation | actual cash held by the public |
| checkable bank deposits | bank accounts on which people can write checks |
| money supply | the total value of financial assets in the economy that are considered money |
| medium of exchange | an asset that individuals acquire for the purpose of trading for goods and services rather than for their own consumption |
| store of value | an asset that is a means of holding purchasing power over time |
| unit of account | a measure used to set prices and make economic calculations |
| commodity money | a medium of exchange that is a good, normally gold or silver, that has intrinsic value in other uses |
| commodity-backed money | a medium of exchange that has no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods on demand |
| Fiat money | a medium of exchange whose value derives entirely from its official status as a means of payment |
| monetary aggregate | an overall measure of the money supply |
| Near-moneys | a financial asset that can't be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits |
| present value | the amount of money needed at the present time to produce, at the prevailing interest rate, a given amount of money at a specified future time |
| net present value | the present value of current and future benefits minus the present value of current and future costs |
| Bank reserves | currency held by banks in their vaults plus their deposits at the Federal Reserve |
| T-account | a simple tool that summarizes a business's financial position by showing, in a single table, the business's assets and liabilities, with assets on the left and liabilities on the right |
| reserve ratio | the fraction of bank deposits that a bank holds as reserves |
| required reserve ratio | the smallest fraction of deposits that the Federal Reserve allows banks to hold |
| bank run | a phenomenon in which many of a bank's depositors try to withdraw their funds due to fears of a bank failure |
| Deposit insurance | a guarantee that a bank'g depositors will be paid even if the bank can't come up with the funds, up to a maximum amount per account |
| Reserve requirements | rules set by the Federal Reserve that set the minimum reserve ratio for banks |
| discount window | an arrangement in which the Federal Reserve stands ready to lend money to banks |
| Excess reserves | a bank's reserves over and above the reserves required by law or regulation |
| monetary base | the sum of currency in circulation and bank reserves |
| money multiplier | the ratio of the money supply to the monetary base; indicates the total number of dollars created in the banking system by each $1 addition to the monetary base |
| central bank | an institution that oversees and regulates the banking system and controls the monetary base |
| commercial bank | a bank that accepts deposits and is covered by deposit insurance |
| investment bank | a bank that trades in financial assets and is not covered by deposit insurance |
| savings and loan (thrift) | deposit-taking banks, usually specialized in issuing home loans |
| leverage | the degree to which a financial institution is financing its investments with borrowed funds |
| balance sheet effect | the reduction in a firm's net worth from falling asset prices |
| vicious cycle of deleveraging | the sequence of events that take place when a firm's asset sales to cover losses produce negative balance sheet effects on other firms and force creditors to call in their loans |
| Subprime lending | lending to home buyers who don't meet the usual criteria for borrowing |
| securitization | the pooling of loans and mortgages made by a financial institution and the sale of shares in such a pool to other investors |
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