Flashcards: Chapter 1 ⎸Why Study Money, Banking, and Financial Markets?

Terms for Chapter 1

A/An **_____** is a claim on the issuer’s future income or assets.

**Security**

**_____** are any financial claim or piece of property that is subject to ownership.

**Assets**

A/An **_____** is a debt security that promises to make payments periodically for a specified period of time.

**Bond**

A/An _____ is the cost of borrowing or the price paid for the rental of funds.

**Interest rate**

What are 2 types of interest rates?

Mortgage interest rates and car loan rates

A/An_____ is a share of ownership in a corporation.

**Stock**

The _____ is where shares of stock are traded.

**stock market**

A day when the United states experienced the largest one-day percentage drop in stock market history is known as _____.

**Black** **Monday**

**_____** are institutions that borrow money from people who have saved and lend it out.

**Financial intermediaries**

**_____** are major disruptions in financial markets characterized by sharp declines in asset prices and the failure of numerous financial and nonfinancial businesses.

**Financial crises**

**_____** are financial institutions that accept deposits and make loans.

**Banks**

**_____** is the development of new financial products and services.

**Financial innovation**

Financial innovation has resulted in significant advances in information technology such as _____, the ability to deliver financial services electronically.

**e-finance**

**_____** is defined as anything that is generally accepted as payment for goods or services or for debt repayment.

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**Money**

**_____** is the total production of goods and services.

**Aggregate output**

The upward and downward movement of aggregate output produced in the economy is known as **_____.**

**Business cycles**

**_____** are periods of declining aggregate output.

**Recessions**

The _____ theory relates the quantity of money and monetary policy to changes in aggregate economic activity and inflation.

**Monetary** **theory**

The average price of goods and services in an economy is called the **_____**.

**Price level**

_____ is a continual increase in the price level and it can affects individuals, businesses, and the government.

**Inflation**

The _____ is the rate of change of the price level.

**Average inflation rate**

The _____ policy is the management of money and interest rates.

**Conduct of monetary policy**

The **_____** policy deals with decisions about government spending and taxation.

**Fiscal policy**

A/An **_____** is the excess of government expenditures over tax revenues for a particular time period.

**Budget** **deficit**

A/An **_____** occurs when tax revenues exceed government expenditures.

**Budget** **surplus**

The _____ is where funds are transferred from one country to another.

**Foreign exchange market**

The _____ is the price of one country’s currency in terms of another’s.

**Foreign exchange rate**

**_____** is the market value of all final goods and services produced in a country during the course of the year.

**Gross domestic product**

The total income of factors of production from producing goods and services in the economy during the course of the year is known as **_____.**

**Aggregate income**

When the total value of final goods and services is calculated using current prices, the resulting GDP measure is known as **_____**.

**Nominal GDP**

GDP measured with constant prices is known as _____ GDP.

**Real**

What are the 3 methods of measuring aggregate price level in economic data?

**GDP deflator; PCE deflator; CPI**

Which method of measuring aggregate price level is found by dividing the **nominal** GDP by the **real** GDP?

**GDP deflator**

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Which method of measuring aggregate price level is found by dividing the **nominal** personal consumption expenditures (PCE) by **real** PCE?

**PCE deflator**

The _____ is measured by pricing a “basket” of goods and services bought by a typical urban household.

**Consumer price index (CPI)**

A/An **_____** is the percentage change in a variable.

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**Growth rate**

The _____ is the growth rate of the aggregate price level.

**Inflation rate**