Macroeconomics - Credit Markets Flashcards

Vocabulary flashcards for Macroeconomics lecture notes, Fall Semester 2022-23, Week 9, Assist. Prof. Dr. Merve Hamzaoğlu

Debtors

Economic agents who borrow funds—including entrepreneurs, home buyers, and medical students.

Credit

The funds that debtors borrow.

Principal

The original amount of borrowed money.

Interest rate

The additional payment, above and beyond the repayment of principal, that a borrower needs to make on a one-dollar loan (at the end of one year).

Nominal interest rate (i)

The annual cost of a one-dollar loan.

Inflation rate

The rate of increase in prices.

Nominal GDP

The total value of production (final goods and services), using current market prices to determine the value of each unit that is produced.

Real GDP

The total value of production (final goods and services), using market prices from a specific base year to determine the value of each unit that is produced.

Real interest rate (r)

Nominal interest rate minus inflation.

Fisher Equation

r = i − π

Credit demand curve

The schedule that reports the relationship between the quantity of credit demanded and the real interest rate.

Credit supply curve

The schedule showing the relationship between the quantity of credit supplied and the real interest rate.

Credit market equilibrium

The real interest rate and quantity of credit at which the credit supply curve and the credit demand curve intersect.

Financial intermediaries

Organizations that provide the bridge from lenders to borrowers.

Financial intermediaries

Channel funds from suppliers of financial capital, like savers, to users of financial capital, like borrowers.

Bank's balance sheet

Summarizes its assets and its liabilities.

Official bank reserves

Consist of vault cash and deposits at the Central Bank.

Cash equivalents

Riskless, liquid assets that a bank can immediately access.

its value doesn’t change from day to day

An asset is riskless if.

it can quickly and easily be converted into cash, with little or no loss in value

An asset is liquid if.

Demand deposits

Funds that depositors can access on demand by withdrawing money from the bank, writing checks, or using their debit cards.

Short-term borrowing

Short-term loans that a bank has obtained from other financial institutions.

Long-term debt

The debt that is due to be repaid in a year or more.

Stockholders’ equity

The difference between a bank’s total assets and total liabilities.