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Financial intermediaries
________: Organizations that receive funds from savers and channel them to investors.
interest rate
As the ________ decreases, the opportunity cost of your funds also decreases, so the present value of a given payment in the future rises.
today
An investment is an action that creates a cost ________ but provides benefits in the future.
Invest
________ in a project if the cost you incur today is less than or equal to the present value of the future payments from the project.
Securitization
________: The practice of purchasing loans, repackaging them, and selling them to the financial markets.
Procyclical
________: Moving in the same direction as real GDP.
Present Value
________: The maximum amount a person is willing to pay today to receive a payment in the future.
Multiplier accelerator
________ model: A model in which a downturn in real GDP leads to a sharp fall in investment which triggers further reductions in GDP through the multiplier.
Leverage
________: Using borrowed funds to purchase assets.
Issuance companies
________ lend the premiums received to earn returns from investments so they can pay off the insurance claims of individuals.
Deposit insurance
________: Federal government insurance on banks and savings and loans.
source of liquidity
Funds deposited in a bank account, provide a(n) ________ for households because they can be withdrawn at any time.
earnings
Retained ________: Corporate earnings that are not paid out as dividends to their owners.
Accelerator theory
________: The theory of investment that says that current investment spending depends positively on the expected future growth of real GDP.
Liquid
________: Easily convertible into money on short notice.
Financial intermediation
________ does not always work.
interest rates
When ________ fall, the present value of a given payment in the future increases.
financial intermediaries
Increases in leverage increase the risk that ________ undertake because they are obligated to pay off the funds they have borrowed, regardless of the actual performance of the assets they have purchased.
Retained earnings
________________: Corporate earnings that are not paid out as dividends to their owners.
Q-theory of investment
________________: The theory of investment that links investment spending to stock prices.
Corporate bond
_____________: A bond sold by a corporation to the public in order to borrow money.
