Duane Graddy's
Select the first letter of the word from the list above to
jump to appropriate section of the glossary. If the term you are
looking for starts with a digit or symbol, choose the '#' link.
- Ability-to-Pay
The principle of ability-to-pay states that those
individuals with the greatest income or wealth should pay
the greatest share of taxes.
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- Accelerated
Depreciation
The writing-off of the historical cost of a depreciable
asset at a rate greater than the straight-line
depreciation method.
-
- Accrued Interest
Interest that has been earned but not actually paid.
-
- ACH
An acronym for Automated Clearing House.
-
- Accounting Equation
Assets equal liabilities plus capital.
-
- Adaptive
Expectations
Expectation formulated on the past movement of an
economic variable.
-
- Adjustable
Rate Mortgage (ARM)
Mortgage loan under which the interest rate is
periodically adjusted to reflect current market rates.
-
- Adjusted Gross
Income
Income from all taxable sources minus expenses allowable
in earning that income.
-
- Adjustment Credit
Credit extended by the Federal Reserve to depository
institutions to handle temporary liquidity problems
attributable to short-term fluctuations in their loans
and deposits.
- Regulation
A
-
- Ad Valorem Tax
An excise tax computed as a percentage of a product's
purchase price.
-
- Adverse Selection
Those individuals most at risk are the most likely to
purchase insurance.
-
- Agenda Manipulation
The process of arranging the sequence of votes in order
to take advantage of the cyclical voting phenomenon.
-
- Aggregate Demand
The total quantity of goods and services demanded in an
economy at different aggregate price levels.
-
- Aggregate Output
The total amount of final goods and services produced in
an economy.
-
- Aggregate Price
Level
The weighted average price of goods and services in an
economy.
-
- Aggregate Supply
The total quantity of goods and services supplied in an
economy at different aggregate price levels.
-
- Allocative
Efficiency
An economic state where no rearrangement of goods could
increase the satisfaction of one person without lowering
the satisfaction of another person.( See Pareto optimal )
-
- American
Depository Receipts (ADRs)
Receipts for the shares of foreign based companies which
are held in U.S. banks and sold in the U.S. market.
-
- American Option
An option that can be exercise at any time prior to its
contractual expiration date.
-
- AMEX
- The acronym for The American Stock Exchange
-
- Amortization
The process of reducing the amount of debt outstanding by
making periodic payments of interest and principal.
-
- Annual
Percentage Rate
The actual cost of credit expressed as a percent per
annum.
-
- Appropriation
- An appropriation is an act that permits obligations to be
incurred and payments to be made by governmnetal units.
An appropriation may make funds available from the
general fund, special funds, trust funds, or authorize
the spending of offsetting collections credited to
expenditure accounts, including revolving funds.
-
- APT
An acronym for Arbitrage Pricing Theory.
-
- Arbitrage
The process of simultaneously buying and selling a good
or security in different markets to profit from temporary
imbalances in demand and supply. Arbitrage moves the
market toward equilibrium where demand and supply are in
equilibrium.
-
- Arrow's
Impossibilities Theorem
Individual preferences can not be translated into
collective or social preferences without violating one or
more of the axioms of consumer choice.
-
- Ask Price
The price at which the current owner of a security is
willing to sell it. What the current is asking
for the security.
-
- Assessed Value
The value of property established for tax purposes.
-
- Assessment Ratio
The assessed value of a property divided by its market
value.
-
- Asset Demand
- The demand for a financial asset as a function of wealth,
expected return, risk, and liquidity.
-
- Asymmetric
Information
An exchange process in which buyers and sellers have
different information about the transaction.
-
- ATM
An abbreviation for automated teller machine.
-
- Autonomous
Expenditures
Aggregate expenditures that are not a function
of aggregate income.
-
- Average Fixed Cost
Total fixed cost divided by the quantity of output.
-
- Average Product
The total product ( total output ) divided by the amount
of input.
-
- Average Revenue
Total revenue divided by the quantity of output.( See
Price )
-
- Average Tax Rate
Total taxes paid divided by total taxable income.
-
- Average Total Cost
Total cost divided by the quantity of output.
-
- Average Variable
Cost
Total variable cost divided by the quantity of output.
- Banker's
Acceptances
Banker's acceptances are short-term interest at maturity
notes. These notes do not bear interest but are sold at a
discount and redeemed for full face value by the
accepting bank at maturity. Both the issuer and the
accepting bank guarantee the banker's acceptance.
-
- Bank Holding
Company
A corporation that owns one or more banks. Bank holding
companies are under the regulatory and supervisory power
of the Federal Reserve.
-
- Bank Run
Sudden massive withdrawal of deposits from an individual
bank.
-
- Bank Panic
Simultaneous withdrawal of deposits from many banks.
-
- Barriers to Entry
Any factor inhibiting the establishment of new firms in a
market.Some inhibiting factors include patents,
copyrights, excess capacity, advertising, economies of
scale, and new technology.
-
- Barter
The exchange of goods and services without the use of
money. Every commodity is expressed in terms of every
other commodity.
-
- Basis Point
The smallest unit used for quoting yields on bonds and
notes. One basis point is 0.01% of yield.
-
- Basis Risk
The risk involved in hedging a position with contracts
whose underlying instruments are different from those of
the spot position being hedged.
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- Bear Market
Period of falling stock prices.
-
- Benefits
Received Approach
In principle, public goods and services should be pay for
by those persons who receive the benefits.
-
- Beta Coefficient
A measure of a stock's relative volatility. The Beta is
the covariance of a stock in relation to the entire
market. Dow
Jones Industrials Betas
-
- Bid
The price at which buyers offer to purchase securities
from sellers.
-
- Bilateral Monopoly
A market with one buyer and one seller.
-
- BIS
The acronym for Bank for International Settlements.
-
- Bit.
A bit is either a one or a zero.
-
- Blue Chip Stock
Blue chips are high-quality stocks of major companies
which generally have long and unbroken records of
earnings and dividend payments.
-
- Blue-Sky Laws
Laws passed by the states to protect investors against
securities fraud.
-
- Bond Equivalent
Yield
Discount securities, like Treasury bills, are quoted on a
bank discount basis. But the discount basis is not a
yield, and so cannot be compared to yields of other
instruments. The bond equivalent yield converts the price
implied by the yield on a discount basis into a yield
which is directly comparable to that of other bonds.
-
- Book Value
The value at which an asset is carried on a balance
sheet. Book value may be more or less than market value.
-
- Board of Governors
The governing body of the Federal Reserve System. The
Board is composed of seven members, who are appointed by
the President and confirmed by the Senate for fourteen
year terms. Members
of the Board of Governors
-
- Book-Entry
Securities
Securities that are recorded in an electronic form, in
contract to paper or definitive securities.
-
- Bourse
The French term for stock exchange.
-
- Breach
- Breach is a term from federal budgeting that indicates
the amount by which new discretionary budget authority or
outlay for a fiscal year is above the BEA cap on new
discretionary budget authority or outlays for that year.
- Break-Even Point
The level of output where total revenue equals total
costs.
-
- Budget Authority
- Budget authority is a term from federal budgeting that
means the authority provided by federal law to incur
financial obligations that will result in
outlays.Specific forms of budget authority include
appropriations, borrowing authority, contract authority,
and spending authority from offsetting collections.
-
- Budget Cap
- Cap is a term used in federal budgeting to refer to legal
limits for each fiscal year on the budget authority and
outlays provided by discretionary appropriations. A
sequester is required if an appropriation causes a breach
in the cap.
- Budget Deficit
An excess of federal expenditures over tax receipts.
-
- Budget
Enforcement Act of 1990 (BEA)
- The Budget Enforcement Act of 1990 placed caps on
discretionary spending and established
"pay-as-you-go" requirements on legislation
affecting direct spending or receipts for the federal
budget. The BEA amended the Congressional Budget Act of
1974 and the Balanced Budget and the Emergency Deficit
Control Act of 1985 (Gramm-Rudman-Hollings).
-
- Budget Line
The frontier established by a consumer's income that
indicates the feasible choices available to the consumer.
-
- Budgetary Resources
- In the context of the federal budget, budgetary resources
are those amounts available to enter into obligations in
a given year. They include new budget authority,
obligation limitations, direct spending authority,
recoveries of unexpired budget authority through downward
adjustments of prior year obligations, and unobligated
balances of such resources at the beginning of the year
or transferred in during the year.
-
- Budget Authority
- Budget authority is the authority that becomes available
during the year to enter into obligations that result in
immediate or future outlays of federal government funds.
Most budget authority is in the form of appropriations;
however other typesof authority include contract
authority, authority to borrow, and spending authority
from offsetting collections.
-
- Bull Market
A period of rising stock prices.
-
- Business Cycle
Fluctuations in the level of aggregate economic activity.
NBER
business cycle dates
-
- Byte
Eight bits. (See bit)
- Callable Bond
A bond that may be redeemed by the issuing company at a
stated contractual price (see call price) prior to
maturity.
-
- Call Date
The date on which a company may begin to exercise its
call rights.
-
- Call Option
An option to purchase a security at a specified price
called the strike price.
-
- Call Price
The contractual price at which a company can redeem
(call) its securities after the call date.
-
- Cap
A cap on an adjustable rate mortgage guarantees that the
rate adjustment will not exceed a designated number of
percentage points at the adjustment period
-
- Capital Gain
A capital gain occurs when the price or value of an asset
increases.
-
- Capital Loss
A capital loss occurs when the price or value of an asset
decreases.
-
- Capital Market
The term capital market can be used in different ways. A
capital market can be viewed as a market for capital
goods. In this context it is defined by the
interaction between the demanders and suppliers of real
capital goods. Capital markets can also be defined in a
financial sense as the market for long-term loanable
funds. In this context the supply and demand for loanable
funds determines the equilibrium interest rate and
quantity of loanable funds.
-
- Cartel
A combination of companies that formally agree to
establish market prices and share market output.The
Organization of Petroleum Exporting Countries ( OPEC ) is
a modern day example of a cartel.
-
- Cash
Currency plus token coins.
-
- Ceiling Price
A maximum price established by the government to which
companies must comply. A ceiling price is set below the
market equilibrium. Rent control is an example of a
ceiling price.
-
- Central Bank
The monetary authority of a nation. The government
organization that implements monetary policy.
-
- Chapter 7
A state of insolvency requiring the liquidation of an
entity.
-
- Chapter 11
A court approved reorganization of a company. The company
continues to operate the business while negotiating the
restructuring and repayment of outstanding debts.
-
- Coase Theorem
The theorem that externalities can be handle by a market
exchange process as long as transaction costs are
negligible.( see Pigouvian Tax )
-
- Coefficient of
Variation
The ratio of the standard error for a variable to the
mean value of the variable.
-
- Coinage Act of 1792
- The act that established a bimetallic monetary standard
in the United States.
- Collateral
Security (assets) pledged to assure repayment of a loan.
-
- Commercial Paper
Commercial paper is a short-term money market instrument
issued by financial and industrial corporations.
Maturities range from one day to 270 days. Round lots for
commercial paper are usually $1 million or more, though
smaller units called odd lots are available.
-
- Comparative
Advantage
Country A has a comparative advantage over Country B if
the opportunity cost of producing a good X relative to
good Y in A is lower than in B.
-
- Complement
A goods that go together such as floppy disks and
computers or video tapes and VCRs. When the price of VCRs
rise, the demand for video tapes declines, other things
equal.
-
- Constant Cost
Industry
An industry with a horizontal long-run supply curve.
-
- Constant
Returns to Scale
A situation where a given proportional increase in inputs
leads to the same proportional increase in output.
-
- Consumer Surplus
The difference between the amount consumers would pay for
a good or service and the amount they actually have to
pay for it.
-
- Contestable Market
A market where the entry and exit of firms is not
inhibited by sunk cost.
-
- Contract Authority
- Contract authority permits obligations to be incurred by
governmnetal units but requires a subsequent
appropriation or offsetting collections to pay the
obligations.
-
- Contract Curve
The locus of Pareto optimal points.
-
- Convexity
The convexity of a bond measures the curvature of the
price/yield relationship of a bond's cash flows. The
greater the convexity, the steeper the curvature of the
price/yield curve.
-
- Cooperative Game
A strategic situation in which participants can negotiate
contracts allowing them to share a market and maximize
joint profits.
-
- Coupon Rate
The rate of interest on a bond expressed as a percentage
of par. The coupon is established at the time of issue
and is determined by market interest rates prevailing at
that time .
-
- Country Risk
The risk that sovereign or private borrowers in a given
country will be unable or unwilling to meet their
obligations for reasons other than those associated with
typical lending risk.
-
- Cournot Model
A duopoly market where each firm makes it output decision
assuming that the other firm's output remains constant.
The Cournot model is also referred to as the output
follower model.
-
- Credit Risk
Credit risk is the risk that an issuer of a debt
obligation could default on either interest or principal
payments..
-
- Credit Rating
Bonds are generally rated by one or both of the two major
credit rating agencies: Moody's Investor Service and
Standard & Poor's Corporation. They assign ratings to
a bond issue based on the issuer's ability to make the
scheduled interest and principal payments on their
outstanding debt. These ratings are reviewed periodically
and may be revised at any time.
-
- Cross
Elasticity of Demand
The percentage change in the quantity demanded of good X
for a one percent change in the price of good Y.
-
- Cross Hedge
A situation in which the instrument being used to hedge a
spot position is different from the actual instrument
being hedged.
-
- Crowding-Out
A reduction in private spending caused by an increase in
market interest rates due to a rise in the Federal
deficit.
-
- Currency
Appreciation
An increase in the value of one country's currency
relative to the currency of other countries.
-
- Currency
Depreciation
A decrease in the value of one country's currency
relative to the currency of other countries.
-
- Current Yield
Contractual interest payment divided by the current
market price of a bond.
-
- CUSIP Number
A universal identification code or number assigned to
securities, similar to your social security number, used
to keep track of the issues bought and sold.
-
- Cyclical Stocks
Cyclical stocks are those of companies whose earnings are
tied to the business cycle. When business conditions are
good, the company is profitable and its common stock
price usually rises. When business conditions decline,
the company's earnings and stock prices usually fall.
Steel, cement, machine tools and automobile stocks are
considered cyclical stocks.
-
-
- Dealer
Individuals who buy and sell financial instruments at a
stated price out of their own inventory. Dealer profit is
the spread between the bid and ask price.
-
- Decreasing
Cost Industry
An industry with a downward sloping long-run supply
curve.
-
- Decreasing
Returns to Scale
A situation where a proportional increase in inputs leads
to a less than proportional increase in output.
-
- De facto
"In fact" or "in reality" in contrast
to de jure. (See de jure)
-
- Defensive Stocks
Stocks of companies which provide necessary services
(such as electric and gas), essentials (such as food), or
staples (such as soft drinks). Defensive stocks provide a
degree of stability during periods when the economy is
declining.
-
- Deferral
- A deferral is a term used in federal budgeting to
indicate an Executive Branch action or inaction that
withholds, delays, or effectively precludes the
obligation or expenditure of budgetary resources. The
President proposes deferrals to Congress by special
message. They are not identified separately in the
budget.
-
- Deferred Contract
A contract for delivery or acceptance of a security or
commodity at future date.
-
- Deficit Unit or
Sector
- A unit or sector of the economy that invests more in real
assets than it saves. The difference being financed by
the creation of a financial instrument.
-
- Deflating
The mathematical operation of converting nominal entities
into real entities. For example, dividing the nominal GDP
by the by the GDP deflator provides an estimate of the
real GDP.
-
- Deflation
A negative rate of change in the general level of prices.
-
- De jure
By law or right in contrast to in actuality or in fact.
(See de facto)
-
- Demand Deposits
Deposits which are payable to the depositor on demand and
bear no explicit interest return.
-
- Demand Function
The function showing the quantity of goods consumers are
willing to purchase at various prices.Movements along the
demand function are referred to as changes in the
quantity demanded in contrast to shifts in the demand
function which are denoted as changes in demand.
-
- Depository
Institutions
Financial intermediaries that obtains their funds
primarily through the acquisition of deposits from the
public. Commercial banks, savings and loan associations,
savings banks, and credit unions are depository
institutions.
-
- Depreciation
The decline in the economic value of an asset.
-
- Deregulation
The process of relaxing or eliminating government
regulations on market decisions.
-
- DIDMCA
The abbrevation for the Depository Institutions
Deregulation and Monetary Control Act of 1980.
-
- Dilution
The reduction in a company's earnings per share that
occurs when it issues new stock or converts convertible
issues.
-
- Direct Spending
- Direct spending is a term from federal budgetig that
means budget authority provided by law other than
appropriation acts, entitlement authority, and the food
stamp program.
-
- Discount Bond
A bond selling at less than its par or face value.
-
- Discounted Cash
Flow
A method used to estimate the present value of future
earnings or cash flows.
-
- Discount Points
A form of interest paid at closing to lower the borrowing
rate over the term of the loan. One point equals 1% of
the loan amount.
-
- Discount Rate
The interest rate paid by eligible depository
institutions when they borrow funds directly from a
Federal Reserve Bank.
-
- Discretionary
Spending
- Discretionary spending is a term from federal budgeting
that refers to budgetary resources provided in
appropriations acts.
-
- Disposable Income
Total consumer income less taxes. Income available for
consumer spending. Disposable
personal income 1959-1996
-
- Diversification
Spreading your assets among different types of
investments to reduce risk.
-
- Diversifiable Risk
Risk that can be reduced by adding securities whose
return streams are not perfectly correlated to a
portfolio.
-
- Dividend
The portion of a company's net earnings paid to investors
on a per-share basis.
-
- Dollar-Cost
Averaging
Purchasing the same dollar
amount of an investment at fixed intervals. More shares
are bought when prices are down and fewer when prices are
up.
-
- Dominant Strategy
A situation in game theory where one player has the best
strategy no matter what strategy the other player
follows.
- Double
Coincidence of Wants
- The requirement of a barter economy that the goods
individual A wants to exchange with individual B are
those B desires and the goods individual B wants to
exchange with individual A are those A desires.
-
- Double Leverage
Issuance of debt by a banking holding company to fund an
equtiy investment in an affiliated bank.
-
- Dual Banking System
A system where banks are chartered and regulated by two
different levels of government.
- Economic Model
Economic model is the name sometimes given to an economic
theory. However, the connotation economic model
can also denote a formal statement within a more general
theory. For example, the model of consumer demand within
the more general theory of market behavior or the model
of investment behavior within the theory of aggregate
economic activity.
-
- Economic Theory
An economic theory is a qualified explanation of economic
phenomenon. A theory is a qualified explanation in the
sense of abstracting only certain parts of the phenomenon
to explain under a limited set of conditions.
-
- Edgeworth Box
A rectangular diagram mapping all possible combinations
goods between two consumers or possible combinations of
inputs for two producers.
-
- Emergency
Appropriations
- Emergency appropriations are appropriations that the
President and the Congress have designated as an
emergency requirement under the Budget Enforcement Act.
If it pertains to a discretionary program, such an
appropriation results in an adjustment to the
discretionary cap. Mandatory emergencies are not counted
as a pay-as-you-go increase in the deficit.
-
- Emissions Fee
A per unit charge imposed on the emitters of pollutants.
-
- Engel Curve
A function showing the relationship between money income
and the quantity of a good consumed. Income elasticity is
measured in terms of the Engel curve.
-
- Equation of
Exchange
A statement expressing the determinants of nominal
aggregate spending. MV = PQ where M = money supply, V =
velocity of money, P = aggregate price level, and Q =
real output. In terms of rates of change, the equation of
exchange can be expressed as (DM/M) +
(DV/V) = (DP/P) + (DQ/Q).
-
- Equilibrium Price
The price at which the quantity supplied equals the
quantity demanded.
-
- Equilibrium
Quantity
The quantity at which the supply price equals the demand
price and the amount suppliers desire to supply equals
the amount demanders desire to consume.
-
- Estate
Assets owned by an individual at death.
-
- Estate Tax
An excise tax that the Federal Government assesses on the
transfer of assets at death.
-
- Eurodollars
Dollar denominated deposits in foreign banks or the
foreign branches of U.S. banks.
-
- European Option
An option that can only be exercised at its expiration.
-
- Excess Demand
A situation where the quantity demanded exceeds the
quantity supplied. In a free market an excess demand will
be remedied by an increase in the market price of a good.
(See Shortage )
-
- Excess Reserves
Bank reserves greater than those required by the Federal
Reserve under Regulation D.
-
- Excess Supply
A situation where the quantity supplied exceeds the
quantity demanded. In a free market an excess supply will
be remedied by a decrease in the market price of a good.
(See Surplus)
-
- Exchange Rate Risk
Risk associated with the variability of foreign exchange
rates.
-
- Expansion Path
A function showing the input combinations that minimize
cost for each level of output. The expansion path traces
the long-run total cost curve. The long-run average cost
(LAC) and long-run marginal cost (LMC) are derived from
this function.
-
- Expectations
Approach
the theory of the term structure of interest rates which
defines the long-term rate as the average of the expected
short-term rates over the time to maturity.
-
- Expected Value
The weight average value of a series of risky outcomes or
possibilities.
-
- Extended Credit
Credit extended by the Federal Reserve to depository
institutions to overcome longer-term liquidity problems
attributable to unusual circumstances. Regulation
A
- Federal Funds
Overnight loans that depository institutions grant to
each other which are settled in immediately available
funds.
-
- Federal
Deposit Insurance Corporation (FDIC)
The government agency responsible for insuring the
deposits of depository institutions. The FDIC is also
responsible for the resolution of bank failures.
-
- Federal
Home Loan Mortgage Corporation (FHLMC)
A government-sponsored enterprise chartered by Congress
and owned by stockholders. Freddie Mac buys
qualified mortgage loans from financial institutions that
originate them, securitizes the loans, and distributes
the securities through dealers. Freddie Mac guarantees
timely payment of both principal and interest on its Gold
Participation Certificates (PCs). Some older series of
Freddie Mac PCs guarantee timely payment of interest and
eventual payment of principal. These securities are not
backed by the full faith and credit of the federal
government.
-
- Federal
National Mortgage Association (FNMA)
A government-sponsored enterprise chartered by Congress
and owned by stockholders. Fannie Mae buys
qualified mortgage loans from financial institutions that
originate them, securitizes the loans, and distributes
the securities through dealers. Fannie Mae guarantees the
timely payment of both principal and interest on its
mortgage securities, whether or not the payments have
been collected from the borrower. These securities are
not backed by the full faith and credit of the federal
government.
-
- Federal
Open Market Committee
The FOMC is the primary policy making body of the Federal
Reserve system. The FOMC is composed of twelve voting
members, seven members of the Board of Governors and five
district bank presidents, one of whom is always the
president of the Federal Bank of New York. Calendar, Members,
and Minutes
of Meetings
-
- Federal Outlays
- Federal outlays are the measure of federal government
spending. They are payments to liquidate obligations,
other than the repayment of debt.Federal outlays are
usually stated net of any related refunds and offsetting
collections. Generally outlays are equal to cash
disbursements, but they are also recorded for
cash-equivalent transactions, such as the subsidy cost of
direct loans and loan guarantees, and interest accrued on
public issues of the public debt.
-
- Fiscal Policy
Tax and spending policies set by Congress and the
President.
-
- Fiscal Year
- In the context used here fiscal year is the federal
government's accounting period. It begins on October 1st
and ends on September 30th, and is designated by the
calendar year in which it ends.
-
- FOMC
The acronym for Federal Open Market Committee.
-
- Federal
Reserve Act (1913 )
The legislation that created the Federal Reserve System.
-
- Federal Reserve
Banks
The twelve district banks of the Federal Reserve system.
-
- Federal Reserve
System
The Federal Reserve System is composed of the Board of
Governors, Federal Open Market Committee, twelve Federal
Reserve banks, and twenty-five Federal Reserve bank
branches, and the Federal Advisory Council.
-
- Fedwire
A payments service operated by the Federal Reserve System
as a private wire network for transfers between financial
institutions maintaining accounts at the Federal Reserve
Bank.
-
- FHA
An acronym for Federal Housing Administration.
-
- Fiat Money
Currency declared as legal tender by government fiat
which does not have metallic backing or convertibility.
-
- Fiduciary
A person having a duty to act primarily for anther's
benefit. A person or institution who manages money or
property for another and who must exercise prudent expert
care in the management of such activities.
-
- Financial Asset
A claim on an issuer for a stream of payments or cash
flows. In the case of equities it is a representation of
ownership.
-
- Financial Engineer
A person who designs innovative financial instruments,
processes, and solutions to financial problems.
-
- Financial Leverage
The responsiveness of a firm's net income to a change in
its financial structure. The amount of debt used in the
financial structure.
-
- Financial Times 100
The leading index of securities prices on the London
Stock Exchange.
-
- FIRREA
An acronym for the Financial Institutions Reform,
Recovery and Enforcement Act of 1989.
-
- Flat Tax
A constant marginal rate of taxation over all incomes.
-
- Forecast Error
- The difference between the actual and expected value.
- Foreign Exchange
The currency of other countries.
-
- Foreign Exchange
Rate
The price of one country's currency in terms of another
country's currency.
-
- Foreign
Exchange Market Intervention
Purchase or sale of foreign currencies by a central bank
for the purpose of influencing foreign exchange rates or
maintaining orderly foreign exchange markets.
-
- Forward Contract
An agreement between two parties in which one party is
obligated to deliver a stated amount of an asset at a
specific price on a specific date in the future.
-
- Forward Rate
The expected rate plus the liquidity premium associated
with a given maturity.
-
- Fraud Risk
Risk of loss due to dishonesty,deceit, or misconduct by
officers, employees, customers, or other agents.
-
- Free Reserve
Excess reserves in the banking system minus aggregate
bank borrowing from the Federal Reserve system.
-
- Free-Rider
An individual who does not reveal their true preference
about public goods. Knowing that the goods are collective
in consumption and nonexcludable, free-riders understate
their true desire for the good hoping to obtain it for
free or at a low price.(See Public Good )
-
- Frictional
Unemployment
Temporary unemployment occurring when individuals change
jobs or move to other geographical areas.
-
- Functions of Money
Money is a medium of exchange, standard of value ( unit
of account ), store of value, and standard of deferred
payment.
-
- Futures Contract
A standardized forward contract which is traded on an
organized exchange. A futures contract obligates the
buyer to purchase the underlying asset at a predetermined
time and price.
-
- FV
An acronym for Future Value.
- General Fund
- In the terminology of federal budgeting, the general fund
consists of accounts for receipts not earmarked by law
for a specific purpose, the proceeds of general
borrowing, and the expenditure of these monies.
-
- General
Obligation Bonds
General obligation bonds ( GOs) are backed by the full
taxing power of the issuer.
-
- GDP
The gross domestic product is the final value in current
prices of all goods and services produced within
a country in a given year.
-
- GDP Deflator
An index that measures the average price of the goods and
services making-up the GDP ( the GDP market basket)
relative to a base year.
-
- Giffin Good
A Giffin is a good that has an upward sloping demand
function. The negative income effect of a price change is
so strong that it overcomes the substitution effect
producing a positively sloped demand function. Giffin
goods defy the law of demand.
-
- GNP
The gross national product is the final value in current
prices of all goods and services produced by resources owned
by the residents of a country in a given year.
-
- Gold Reserve
Act of 1934
- The act that established what has been referred to as a
gold bullion standard in the United States. Gold were
taken out of circulation domestically, but gold remain
the standard money in international transactions.
-
- Government
National Mortgage Association (GNMA)
A government agency that guarantees the timely payment of
principal and interest on all of its pass-through
securities, and its guarantee is backed in turn by the
federal government.This means that holders of bonds and
certificates issued by Ginnie Mae will receive
payments promptly each month whether or not the mortgage
payments are collected. Furthermore,they will receive
full repayment of principal even if the mortgages in the
pool default.
-
- Gramm-Rudman-Hollings
Act
An act originally passed in 1985 to balance the federal
budget in five years. The sequestration process
originated in this law.
-
- Greenbacks
- Paper currency issued by the U.S. Treasury during the
Civil War.
-
- Group of Seven
(G-7)
An economic policy group composed of the seven leading
industrial nations: Canada, France, Germany, Italy,
Japan, United Kingdom, and United States.
-
- Growth Stocks
Stocks of companies whose sales, earnings and market
share are expanding faster than the industry average as
well as the general economy. These companies usually
retain most of their earnings to finance expansion and
pay little, if any,dividends to shareholders.
- High-Powered Money
Another name for the monetary base.
-
- Horizontal Equity
Individuals with similar circumstances should be taxed
similarly.
-
- Humphrey-Hawkins
Act
A short name for the Full Employment and Balanced Growth
Act of 1978.
-
- Hyperinflation
An inflation rate exceeding 50 percent per month.
-
- Hypertext
Any text that contains links to other documents. Words or
phrases in the document can be chosen by a reader to
retrieve and display other documents.
- IBF
The abbrevation for international banking facilities.
IBFs are entities established to perform limited foreign
operations.
-
- Immediately
Available Funds
Funds that can be withdrawn or transferred on demand;
i.e., with no waiting period.
-
- Immunization
Immunization is the structuring of a portfolio in such a
way that any changes in the general level of interest
rates will not negatively impact the total expected
return on the portfolio. A situation where variations in
market price risk due to a change in interest rates is
offset by contrasting changes in reinvestment risk.
-
- Income Elasticity
The percentage change in the quantity of a good demanded
for a one percent change in money income.
-
- Income Stocks
Stocks of such companies as public utilities that usually
pay high dividends in relation to their market price and
provide shareholders with relatively high quarterly
income. These stocks are generally attractive to people
who buy stocks for current income, particularly elderly
and retired persons.
-
- Indenture
A contract stating the terms of a bond issue.
-
- Indifference Curve
A function showing combination of goods that yield the
same ranking ( level of satisfaction ) for an individual.
-
- Inferior Good
A good whose Engel Curve is downward sloping. As a
consumer's real income increases their demand for an
inferior good decreases.
-
- Interest Payment
Dates
The dates, usually set at semiannual intervals, on which
interest is due to the owner of a bond.
-
- Interest Rate Risk
Risk associated with fluctuations of bond prices in
response to the general movement of the interest rates.
-
- Interest Spread
- The difference between the rate charged to borrowers and
the rate paid to depositors.
-
- International
Monetary Fund (IMF)
An international banking organzation created for the
purpose of lending funds to member nations to promote
cooperation, facilitate balanced trade, and to finance
temporary balance of payments deficits.
- Members,
Structure
-
- Initial
Public Offering (IPO)
The issuance of new stock by a corporation. The company's
prospectus must be delivered to each investor before or
at the time of sale.
-
- Inverted Yield
Curve
A downward sloping or descending yield curve or term
structure.
-
- Investment Bank
A financial institution which originates, purchases,
distributes new issues of stocks and bonds.
-
- Isocost Line
An expense or total cost line which shows all possible
combinations of inputs that can be purchased for a given
outlay expenditure.
-
- Isoquant
A function showing combination of inputs that produce the
same level of output.
-
- Isoquant Map
A set of isoquants.
-
- Jumbos
CD's denominated at a $100000 minimum, usually bought and
sold by large financial institutions.
-
- Junk Bonds
Bonds with high default risk. Junk bonds have ratings of
Baa (BBB) or below.
-
- Keogh Plan
An IRA-type plan specifically designed for self-employed
individuals.
-
- Kite
Writing checks against uncollected balances.
-
- Labor Market
The labor market is the market for labor services. As an
input market, the labor market is defined by the
interaction between the demand for and supply of
labor.This interaction determines the equilibrium wage
and quantity of labor.
-
- Labor Productivity
The average product of labor.
-
- Laddered Portfolio
A laddered portfolio is one where an individual spreads
the total dollar amount of their investment among
securities with different maturities. Some is invested in
short-term maturities, while the rest is invested in
intermediate- and long-term maturities.
-
- Law of
Diminishing Returns
As a variable input is added to a fixed input
the incremental or marginal product of the variable input
will eventually decline. Diminishing returns is
illustrated by the declining portion of the marginal
product function.
-
- Law of
Increasing Cost
As one good is substituted for another good along the
production possibilities curve, relative costs rise.Input
substitution is not perfect so more of one good has to be
given up to produce the same incremental amount of the
other good.
-
- Legal Reserves
Reserve that can be used to meet the reserve requirement
of the Federal Reserve system. Legal reserve include
vault cash and deposits at the Federal Reserve banks.
-
- Legal Tender
Declaration by the government that inconvertible paper
currecy must be accepted in the payment of all debts.
-
- Leverage
The use of borrowed funds to increase a company's rate of
return on equity. In accounting and finance, it is the
amount of long term debt relative to equity.The higher
the ratio the greater the leverage.
-
- Leveraged Buyout
(LBO)
The takeover of a company using borrowed funds.Often, the
company's assets are used as collateral for the loans.
-
- LIBOR
Acronym for the London Interbank Offer Rate
-
- Limit Price
The price that yields a normal return over cost to
exiting firms but does not provide the economic profits
necesary to encourage new entry into the market.
-
- Linked Oligopoly
The theory that as organizations expand into additional
geographic and product markets, firms recognize that
competitive actions in one market area may result in a
competitive reaction in a different market area where
they may be more vulnerable.
-
- Liquidity
The ability to convert a security or asset into cash with
little risk of loss. The combined traits of marketability
and reversibility.
-
- Liquidity
Premium Approach
The theory of the yield curve that defines the long-term
rates on riskless bonds as the average of the expected
short-term rates plus a nondecreasing liquidity premium.
( See Forward Rate )
-
- Loanable Funds
The sum of net saving, dishoarding, increases in the
money supply, and net credit from other countries.
-
- Loan Commitment
A written promise to make a loan for a specified amount
on specified terms.
-
- Loan Guarantee
- As used in federal budgeting, a loan guaratee is any
guarantee, insurance, or other pledge with respect to the
payment of all or a part of the principal or interest on
any debt obligation of a non-federal borrower to a
non-federal lender. The term does not include the
insurance of deposits, shares, or other withdrawable
accounts in financial institutions.
-
- Long-term
Interest Rates
Interest rates on loan contracts or debt instruments
having maturities of greater than one year. The interest
rates on capital market instruments.
-
- Luxury Asset
- An asset with a wealth greater than one.
- M1
The sum of currency and coins, nonbank travelers checks,
demand deposits, and other checkable deposits.
-
- M2
The sum of M1 plus money market deposit accounts,
broker/dealer money market mutual funds,
small-denomination time deposits, saving deposits,
overnight repurchase agreements, overnight Eurodollars.
-
- M3
The sum of M2 plus large denomination time deposits, term
repurchase agreements, term Eurodollars, and
institution-only money market mutual funds.
-
- Macaulay's Duration.
If a bond is viewed as a series of cash flows, this
concept measures sensitivity or true maturity as the
present value-weighted average of the cash flows of the
bond.
-
- Maturity
The maturity of a security is the date the issuer makes
the final payment to the security holder.
-
- Macroeconomics
Macroeconomics is the branch of economics dealing with
aggregate economic entities, such as total investment
spending, aggregate consumption spending, total
industrial capacity, and so forth.
-
- Majority Voting
More than one half of the voters must favor a particular
public policy for it to be approved.
-
- Marginal
In economics, marginal means incremental change in an
economic variable.
-
- Marginal Cost
The extra or incremental cost of producing one more unit
of output.
-
- Marginal Cost of
Funds
The cost of adding new funds to a firm's capital
structure.
-
- Marginal Product
The extra or increment output attributable to an
additional unit of variable input.
-
- Marginal Revenue
The extra or incremental revenue received from the sale
of an additional unit of output.
-
- Marginal
Satisfaction
The satisfaction gained from the consumption of an extra
or incremental unit of output.
-
- Marginal Tax Rate
The relative amount the government takes on the last
dollar of income earned.
-
- Marginal
Rate of Transformation
The rate at which one good can be substituted for another
good along the production possibilities curve.( See Law
of Increasing Cost )
-
- Market
A social process in which buyers ( demanders ) and
sellers ( suppliers ) interact to determine the price and
quantity of a good.
-
- Market Economy
Market Economy is an economy characterized by limited
government intervention. In a pure market economy, the
government's role is to provide a legal framework for
individual decisions, enforce property rights, and
maintain order and security.
-
- Market Failure
A situation where a market transaction produces positive
or negative effects which impact parties or agents who
are not participants in the transaction.( See externality
and third-party effects )
-
- Maturity Date
The date on which a bond will be redeemed at face value
by the issuer.
-
- Means-Tested
A requirement for participation in a government program
which limits access to those individuals below a certain
income level .
-
- Medium of Exchange
An item that facilitates the voluntary exchange process
by reducing search costs and uncertainty. An important
trait of a sustainable money.
-
- Member Bank
A bank that is a member of the Federal Reserve System
-
- Microeconomics
Microeconomics is the branch of economics dealing with
individual economic units and agents, such as consumers,
producers, individual markets, and the interactions among
these individual entities.
-
- Mininum Wage
A governmentally established price floor for wages. Minimum wage
1955-1995
-
- Modified Duration.
The exact measurement of the price sensitivity of a
fixed-income security to a very small change in yield,
expressed as a percentage change in price to a one
percent change in yield. Since the price/yield
relationship is not linear, the calculation is only exact
for very small changes around the initial yield.
-
- Modigliani-Miller
Approach
The theory of the capital structure of a company
indicating that in absernce of taxes and bankruptcy
costs, the cost of capital to the firm is independent of
its capital structure.
-
- Monetarism
The school of monetary thought that explains movements in
nominal GDP in terms of changes in the money supply.
-
- Monetary Base
The sum of the monetary liabilities of the Federal
Reserve and the U.S. Treasury. The Fed's monetary
liabilities include currency in circulation and reserves
of depository institutions. The monetary liabilities of
the Treasury are mainly coins in circulation.
-
- Monetary Policy
Managing the cost and availability of credit to achieve
certain national economic goals such as price stability
and high levels of employment.
-
- Monetary Theory
Explanations of how changes in the money supply impact
real economic activity.
-
- Money
Anything that is generally accepted in the payment of
goods and services.
-
- Money Market
The market for short-term securities;i.e., securities
with maturities of less than one year.
-
- Money Multiplier
The ratio of the money supply to the monetary base.
-
- Monopoly
A market composed of one firm. So the demand function of
the firm is the market demand function.
-
- Mortgage-Backed
Securities
Mortgage-backed securities represent an ownership
interest in mortgage loans made by financial
institutions, such as savings and loans, commercial banks
or mortgage companies, to finance the borrower's purchase
of a home or other real estate. The most basic mortgage
securities, known as "pass-throughs," or
participation certificates, represent a direct ownership
interest in a trust composed of a pool of mortgage loans.
The majority of mortgage securities are issued and/or
guaranteed by the Government National Mortgage
Association (Ginnie Mae), the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac).
-
- Municipal Bonds
Municipal bonds are tax-exempt debt obligations of
states, cities, towns, municipalities, and municipal
authorities. They are issued to build schools, tunnels
and bridges or to finance infrastructure repairs or
improvements.
-
- Municipal Notes
Notes are short-term municipal bonds with a maturity of
one year or less. Notes usually pay interest at maturity
and are issued mostly for the purposes of meeting
cash-flow requirements. Bond anticipation notes (BANs),
revenue anticipation notes (RANs), and tax and revenue
anticipation notes (TRANs) are the more common notes in
today's marketplace.
-
- MZM
All monetary instruments that have zero maturity and
hence are redeemable at par on demand. MZM is computed as
the sum of M2 plus institutional money market mutual
funds minus small time deposits.
-
-
- Nash Equilibrium
A situation in game theory where no player can improve
their position given the strategy of the other player.
-
- National Bank
A commercial bank chartered by the Federal government
through the Office of the Comptroller of the Currency
(OCC). National banks can usually be identified because
they have the words "national" or"national
association" in their titles or the letters N.A. or
N.S.&T. following their titles.
-
- National Banking
Act
The Act establishing the National Banking System. The
National Banking Act was passed in 1864.
-
- Natural Monopoly
A firm whose extended range of economies of scale
encompasses the entire market output.
-
- Natural
Rate of Unemployment
The rate of unemployment that is sustainable in the long
run without increasing inflationary expectations.
-
- Necessity Asset
- An asset with a wealth elasticity equal or less than one.
-
- Net Asset Value
Total assets less intangible assets less all liabilities
divided by number of shares outstanding
-
- Net Burden
Noninterest expenses minus noninterest income
-
- Net Interest Margin
Interest income on earning assets minus interest expenses
on earning assets divided by total earning assets.
-
- Neutrality of Money
The proposition that increases in the money supply cause
offseting increases in the price level leaving real
values uneffected by the change in the money supply.
Changes in the money supply cause changes in nominal
values not changes in real values.
-
- No-load Fund
A mutual fund operated by an open end investment company
that does not assess a sales charge.
-
- Nominal Interest
Rate
The rate of interest actually observed in the market. The
level of the riskless nominal rate is composed of the
real rate and the inflation premium.
-
- Nonborrowed
Reserves
Total reserves minus discounts and advances from the
Federal Reserve.
-
-
- Obligations
- In federal budget terminology obligations are binding
agreements that will result in outlays, immediately or in
the future. By law budgetary resources must be available
before obligations can be incurred legally.
-
- Office
of the Comptroller of the Currency (OCC)
The agency that administers, charters, and regulates
national banks. OCC
Districts
-
- Okun's Law
The empirical generalization that as an economy recovers
from recession, output tends to increase proportionately
more than increases in employment.
-
- Oligopoly
A market structure characterized by competition among a
small number of mutually interdependent firms.
-
- Open-end
Management Company
An investment company that makes mutual fund shares
continually available to the public.
-
- Operating Earnings
The income concept defined as earnings before interest
and taxes (EBIT).
-
- Operating Leverage
The responsiveness of a company's operating income to a
change in sales ( revenue or volume ).
-
- Opportunity Cost
What is given up in real terms to take an alternative
choice or make an alternative decision..
-
- Optimal Forecast
- The market's best of the future using all available
information.
-
- Origination Fee
A fee charged by financial institutions to process the
loan application.
-
- Outyear Estimates
- Outyear estimates in federal budget terminology refer to
the estimates presented in the federal budget for each of
the nine years beyond the current budget year that
reflect the effect of budget year decisions on longer
term objectives and plans.
-
- Over the
Counter (OTC)
The market for securities that are not listed on one of
the major exchanges.
- Par Bond
A bond selling at an amount equal to its face value is
said to be selling at par.
-
- Par Value
The face amount of the bond or the amount the issuer
promises to pay at maturity. With municipal bonds, the
par value is typically $1,000.
-
- Pareto
Efficient Points
Allocations where any enhancement in one individual's
welfare causes a reduction in another individual's
welfare.
-
- Partial
Equilibrium Analysis
The study of the response of particular economic units or
agents ( consumers, investors, producers, savers) to
external events such as a change in income, factor
prices, or taxes.
-
- Paternalism
"The government knows best". The government
uses it judgment to decide which programs are best for
the public.
-
- Pay-as-you-go
(PAYGO)
- PAYGO is a term that refers to requirements in the Budget
Enforcement Act of 1990 that result in a sequester if the
estimated combined result of legislation affecting direct
spending or receipts is an increase in the deficit for a
fiscal year.
-
- Perfect Competition
An auction-type market characterized by price-taker
behavior on the part of firms. Firms can sell as much as
they desire at the going market price but nothing at
prices above it.
-
- Potential Output
The level of real GDP that is sustainable in the long run
without causing inflation. The economy's capacity output.
-
- Preferred
Habitat Approach
The theory of the term structure of interest rate that
defines the long-term rates on riskless bonds as the
average of the expected short-term rates plus a liquidity
premium. ( See Liquidity Premium approach and Forward
Rate )
-
- Price
The market value of an economic good.
-
- Price Earnings
Ratio
Stock price divided by last year's earnings.
-
- Price Risk
The risk that a debt security's price may change due to a
rise or fall in the prevailing level of interest rates.
-
- Price Taker
A company that has no control over market price.
-
- Primary Market
The market in which new securities are sold.
-
- Primary Security
- A secuity issued by a deficit unit to finance a real
investment project.
-
- Product Market
The product market is defined by the demand of and supply
for goods and services. The interaction between the
demand and supply determine the equilibrium price and
quantity of goods and services.
-
- Prospectus
A document describing the financial information about a
new issue. The Securities Act of 1933 requires that a
prospectus be distributed to all investors prior to or at
the time of the initial investment.
-
- Public Good
A good that is collective in consumption and
nonexcludable.The fact that one person consumes a given
quantity of a pure public good does not preclude
someone else from consuming the same quantity. In
addition, the cost of excluding people from consuming the
good,whether they pay for it or not, is prohibitively
expensive. (See free-rider)
-
- Put Option
An option to sell a security at a specified price called
the strike price.
- Quantity Demanded
The change in the quantity of a good that occurs when the
price of that good changes.
-
- Quoted Price
The price at which the last sale and purchase of a
security occurred.
- Random Walk
Approach
The theory of financial intsrument prices indicating that
with no new information prices will fluctuate in an
unpredictable way. At any given time the price of an
instrument is just as likely to go up as down.
-
- Rate of Discount
The interest rate used to convert a stream of future cash
flows into a present value.
-
- Real Bills Doctrine
The theory of central banking discount policy indicating
that if the loan paper discounted by the cental banks is
secured by working capital loans then providing reserves
to support these loans is not inflationary.
-
- Real GDP
GDP adjusted for inflation. Real GDP measures the value
of all final goods and services in constant dollars. The
real GDP is a statistical measure of the volume or
quantity of the nation's output.
-
- Real Interest Rate
The rate of return on a riskless bond expressed in terms
of commodities.The nominal interest rate on a riskless
bond adjusted for inflation.
-
- Real Money Supply
The nominal money supply deflated by a price index.
-
- Real Variable
- An inflation adjusted economic variable. The nominal
value of a variable divided by a price index.
-
- Reappropriation
- In federal budget terminology, reappropriation occurs if
a law extends the availability of unobligated budget
authority that has expired or would otherwise expire.
Reappropriations are counted as new budget authority in
the year in which the balance becomes newly available.
-
- Recission
- Recission is a legislative action that cancels new budget
authority or the availability of unobligated balances of
budget authority prior to the time the authority would
otherwise have expired.
-
- Reinvestment Rate
The reinvestment rate is the rate at which intermediate
cash flows are invested. The IRR method assumes that
intermediate cash flows are reinvested at the internal
rate of return.
-
- Reinvestment Risk
Reinvestment risk refers to the risk that a bondholder
confronts when reinvesting coupon payments. Rates may
fall, lowering the reinvestment rate on coupon payments
below what was originally planned.
-
- Required Reserve
Ratio
The percent of demand deposits and other checkable
deposits that must be held in the form of legal reserves.
( See Legal Reserves) Regulation
D
-
- Reservable
Bank Liabilities
Liabilities subject to the Federal Reserve's reserve
requirement. These liabilities include transaction
deposits, nonpersonal time deposits, and Eurocurrency
liabilities.
-
- Return on
Equity (ROE )
Net income divided by net worth.
-
- Risk Adverse
An individual who prefers a certain outcome to an
uncertain outcome with the same expected return.
-
- Risk-Free Rate
The return on an investment with no credit risk is called
the risk-free rate. An example is the yield on the
three-month Treasury bill.
-
- Risk-Lover
An individual who prefers a risky choice or outcome to a
certain even though they both outcomes have the same
expected return.
-
- Risk Neutral
An individual who is indifferent between a certain
outcome and uncertain outcome with the same expected
return.
-
- R Squared
An R Squared of one means that the returns on two assets
are perfectly correlated. It indicates the relative
change in a dependent variable as a measure of the
relative change in the independent variable.
- Scorekeeping
- In federal budgeting terminology scoring refers to
measuring the budgetary effects of legislative actions,
generally in terms of budget authority, receipts, and
outlays.
-
- Seasonal Credit
Credit extended by the Federal Reserve to small
depository institutions to handle temporary liquidity
needs attributable to regular, seasonal fluctuations in
their loans and deposits. Regulation
A
-
- Secondary Market
The market for used securities so to speak. The market
for stocks and bonds exchanged after their initial issue
and purchase.
-
- Secondary Security
- A security issued by a financial intermediary that
transforms the credit flow from the deficit unit.
Secondary securities have substantially different
maturity, denomination, and liquidity characteristics
than those of primary securities.
-
- Segmented
Markets Approach
The theory of the term structure of interest rates which
portrays individual securities markets as being isolated
from each other to such an extent that the yield -to-
maturity in each maturity segment is determined by supply
and demand conditions in that segment exclusively.
-
- Selling Short
Selling assets that are not actually owned by the seller.
The seller hopes the price will decline. The seller can
cover their short position and make a profit on the
difference between the selling price and purchase price.
During the outstanding short position the seller must
borrow the shares to deliver to the buyer in the short
sale.
-
- Sequester
- Sequester under the Budget Enforcement Act of 1990 is the
cancellation of non-exempt budgetary resources provided
by discretionary appropriations or direct spending
legislation. A sequester may occur in response to a
discretionary appropriation that causes a breach or in
response to increases in the deficit resulting from the
combined result of legislation affecting direct spending
or receipts.
-
- Settlement Date
Settlement date is the date when a security must be
delivered and the payment for it actually made.
-
- Shareholders'
Equity
Total assets minus total liabilities.
-
- Short-run
A period when at least one factor of production is fixed.
-
- Short-term
Interest Rates
Interest rates on loan contracts or debt instruments
having maturities of less than one year. The interest
rates on money market instruments.
-
- Special
Drawing Right ( SDR )
An international reserve asset, so-called "paper
gold", created by the International Monetary Fund
(IMF ).
-
- Special Funds
- Special funds are amounts in the federal budget earmarked
for specific purposes.
-
- Spending Authority
- In federal budgeting spending authority includes the
various types of authority to obligate the governmnet to
make payments, the budget authority for which is not
provided in advance in appropriations acts. The various
types include authority to enter into contracts; to incur
indebtedness; to make payments including loans and grants
to persons or governments who meet certain requirements
established by law; to forgo the collection by the
government of proprietary offsetting receipts; and to
make any other payments including loans, grants, and
payments from revolving funds.
-
- Spread
The difference between the bid and offer (ask) prices.
-
- Spot Rate
The current yield-to-maturity on bonds of
different maturities.( See Forward Rate)
-
- Slutsky Equation
A mathematical expression that separates the impact of a
price change into the income and substitution effects.
-
- Standard Deviation
A statistical measure of variability. It measures the
degree to which a specific value in a probability
distribution varies form its expected return or value.
-
- Standard Error
A measure of how precisely one can estimate a population
value from a given sample.
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- Standard Money
- The standard money of an economy is the commodity in
terms of which the monetary unit is fixed. For example,
if the standard money of an economy is gold then the
country would be on a gold standard. If there is no
standard money, the country is said to be on a fiat money
standard.
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- Standard of Value
A common denominator in which to express the value of all
commodities. For example, the U.S.dollar is a standard of
value and it can be said that the U.S. is on a dollar
standard. An important trait of a sustainable money.
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- Store of Value
An item that will maintain its purchasing power over
time. An important trait of a sustainable money.
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- STRIPS (Separate
Trading of Registered Interest and Principal of
Securities)
The process of separating the principal and interest
payments on bonds creating many mini discount bonds.
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- Substitution Effect
The change in the quantity of a good consumed that
results from a change in relative prices with real income
or satisfaction held constant.
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- Sunk Cost
A nonrecoverable outlay or expenditure.
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- Supplemental
Appropriation
- A supplemental appropriation is an appropriation enacted
subsequent to a regular annual appropriations act when
the need for funds is too urgent to be postponed until
the next regular annual appropriations act.
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- Supply Function
The function showing the quantity of goods producers are
willing to sell or bring to market at various
prices.Movements along the supply function are referred
to as changes in the quantity supplied in contrast to
shifts in the supply function which are denoted as
changes in supply.
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- Surplus Unit or
Sector
- A unit or sector of the economy that saves more than it
invests in real assets. The surplus being available to
purchase the financial instruments issued by deficit
units and financial intermediaries.
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- Time Value Of Money
Money available today is worth more than the same amount
in the future because of the ability to earn compound
interest.
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- Total
Nonfinancial Debt
Outstanding credit market debt of federal, state, and
local governments and of the private nonfinancial sector,
including mortgages and consumer credit, bank loans,
corporate bonds, commercial paper, bankers acceptances,
and other debt instruments.
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- Total Revenue
The price of a good or service multiplied by its
quantity. total revenue is also referred to as total
dollar sales.
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- Transaction
Acccount
Interest bearing and noninterest bearing checking
accounts from which funds can be readily transferred.
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- Treasury Bills
Treasury bills (T-bills) are discount securities issued
by the federal government. As discount instruments they
pay no interest, but receive full face value if held
until maturity. T-bills are issued in minimum
denominations of $10,000, and in multiples of $1,000
thereafter. With original issue maturities of three
months, six months, and one year, T-bills are considered
the least volatile of all Treasury securities.
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- Treasury Bonds
Treasury bonds are coupon-bearing securities issued by
the federal government.They have initial maturities from
10 to 30 years. T-bond pay interest semiannually and
repay principal at maturity.They are exempt from state
and local taxes and are available in minimum
denominations and multiples of $1,000.
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- Treasury Notes
Treasury notes are coupon-bearing securities issued by
the federal government. T-notes have initial maturities
ranging between one and ten years. They pay interest
twice a year and repay principal at maturity. You can buy
notes with two- and three-year maturities for a minimum
of $5,000 and in multiples of $1,000 thereafter. Notes
with four- to ten-year maturities are sold for a minimum
and multiple of $1,000. T-notes are exempt from state and
local taxes.
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- Trust Funds
- In federal budgeting terms, trust funds are accounts,
designated by federal law as trust funds, for receipts
earmarked for specific purposes and for the expenditure
of these receipts; for example, the Social Security Trust
Fund or the Federal Highway Trust Fund.
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- Underwriter
A person or group that assume the risk of buying a new
security issue from a corporate or federal entity, and
profiting or losing by reselling the issue at a spread
between a public offering price and the purchase price.
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- Unemployment Rate
The percentage of the civilian labor force that is
unemployed.
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- Unsecured Loan
A loan with no collateral backing. Debenture bonds are
backed by the general credit of a company but are not
directly secured by collateral.
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- User Fee
The price paid by the users or purchasers of government
services.
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- Usury
Usury occurs when a lender charges a borrower an annual
percentage rate of interest on a loan that exceeds the
ceiling rate established by law.
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- Utility
Possibilities Frontier
A Pareto efficient frontier illustrating the welfare
trade-offs between individuals in a society. For one
individual to gain satisfaction the other must give up
real income or satisfaction.
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- Value-Added
The difference between dollar value of sales and the cost
of the intermediate goods used to produce the products.
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- Vault Cash
Cash held by depository instititutions for day-to-day
operations. Vault cash counts toward meeting the reserve
requirement.
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- Velocity of Money
The speed at which money changes hands. How many times
each dollar is used in purchasing the GDP. In this case
velocity is defined as the nominal GDP divided by the
money supply.
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- Volatility
A relative measure of how rapidly the price of or return
on a security falls or rises within a given period of
time.
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- Wagner's Law
Wagner's law or the law of ever-increasing state activity
indicates that public expenditures have high income
elasticities and thus, the state will grow relative to
the private sector as aggregate income expands.
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- Wealth Elasticity
The percentage change in the quantity demanded of an
asset divided by the percentage change in wealth.
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- Welfare Economics
The normative field of economics that deals with social
desirability of public policies.
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- When Issued (wi)
Term for a Treasury bond transaction conditionally made
because the bond, although authorized, has not yet been
issued.
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- Wire Transfer
The transfer of funds eletronically; e.g., over the
Fedwire.
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- Yen
- Legal tender in Japan.
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- Yield
The yield is defined as the internal rate of
return of a security's cash flows. It is that discount
rate which equates a bond's price to the present value of
its coupon and principal payments.
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- Yield Curve
A diagram showing the relationship between
yield-to-maturity and time-to-maturity.
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- Yield-to-Call
The yield-to-call is the interest rate that makes the
present value of the cash flows equal to the price paid
for a bond if the bond is held to its first call date.
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- Yield-To-Maturity
The rate of interest that discounts the contractual
stream of interest payments and the final principal
payment back to the current market price.
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- Zero Coupon Bonds
Zero-coupon bonds are deep discount securities. They pay
principal and interest at maturity.bonds. The difference
between the amount paid for the bonds and the amount
received at maturity represents the return on investment.
If the zero-coupon bonds are municipal obligations, or
municipal zero-coupon bonds, they are generally exempt
from Federal and state taxes for residents of the issuing
state. Interest on some municipal bonds may subject
certain taxpayers to the alternative minimum tax (AMT).
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- Zero Funds Gap
A situation where rate sensitive assets (RSA) equal rate
sensitive liabilities (RSL). A zero funds gap is
sometimes referred to as a matched-book strategy.
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- 401(k) Plan
A 401(k) plan is a tax-qualified retirement plan funded
all or in part by employees' pre-tax contributions. With
this type of plan, contributions reduce employees'
current taxable income, and the assets in the plan grow
free from taxes. Withdrawals from 401(k) plans prior to
age 59 1/2 are subject to a penalty tax of ten percent.
Withdrawals are subject to income tax in the year the
withdrawals are made. Generally, employer contributions
to 401(k) plans are optional.
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- 403(b) Plan
- A 403(b) retirement program is a tax-saving opportunity
available exclusively to employees of certain tax-exempt
organizations or public educational institutions. It is a
voluntary tax-deferred savings plan that enables a person
to save a portion of their income on a pre-tax basis
through payroll deductions. With the exception of death,
disability or financial hardship, a person cannot
withdraw any money prior to age 59 1/2 or termination of
employment without a tax penalty. The general rule is
that a person must begin withdrawals by April 1 of the
calendar year in which they reach 70 1/2.
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Revised: February 18, 1997
Copyright © 1996.
All trademarks or product names mentioned herein are the
property of their respective owners.