Chapter 5 - The Financial Sector

national savings

A dollar borrowed from ________ is returned to a domestic borrower with interest.

financial system

A well- functioning ________ helps people reduce their exposure to risks.

Transaction costs

________, financial risk, and the desire for liquidity are the three major issues that borrowers and lenders face.

transaction costs

The term ________ refer to the expenses of executing a deal and any of the steps associated with the process.

financial risk

The term ________ refers to the uncertainty about future outcomes that incorporate financial gains and losses.

Loan

________- backed securities are traded on financial markets in a similar manner to bonds.

diversifying

A(n) business owner can reduce the risk of loss by ________ assets, investing in a variety of assets with unrelated (or independent) hazards.

money market

The ________ is in equilibrium at the interest rate rE: the quantity of money demanded by the public is equal to M, which is the quantity of money supplied.

Transaction costs

________, financial risk, and the demand for liquidity are the three major issues confronting borrowers and lenders.