Ch. 9 Vocab

loanable funds market

the market where savers supply funds for loans to borrowers

interest rate

a price of loanable funds, quoted as a percentage of the original loan amount

expected return

the anticipated rate of return based on the probabilities of all possible outcomes

real interest rate

the interest rate corrected for the effects of inflation; rate of return in terms of real purchasing power

nominal interest rate

the interest rate before it is corrected for inflation; stated interest rate

Fisher Equation

real interest rate = nominal interest rate - inflation rate

time preferences

refers to the fact that people prefer to receive goods and services sooner rather than later

consumption smoothing

occurs when people borrow and save to smooth consumption over their lifetime

dissaving

occurs when people withdraw funds from their previously accumulated savings

savings rate

personal saving as a portion of disposable (after-tax) income

investor confidence

a measure of what firms expect for future economic activity