Civics Econ week 2
GDP deflator
for a given year is 100 times the ratio of nominal GDP to real GDP in that year
liquid
if an asset can be quickly converted into cash without much loss of value
loan-backed security
an asset created by pooling individual loans and selling shared in that pool
financial intermediary
an institution that transforms the funds it fathers from many individuals into financial assets
Menu costs
are the real costs of changing listed prices
illiquid
assets that cannot be quickly converted into cash without much loss of value
nominal intrest rate
in the interest rate actually paid for a loan
diversification
investing in several different assets so that the possible losses are independent events
bank deposit
is a claim on a bank that obliges the bank to give the depositor his or her cash when demanded
Real income
is the income divided by the price level
Producer price index
measures changes in the prices of goods and services purchased by producers
price index
measures the cost of purchasing a given market basket in a given year. The index value is normalized so that it is equal to 100 in the selected base year
consumer price index
measures the cost of the market basket of a typical urban American family
interest rate
the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year
disinflation
the process of bringing the inflation rate down
national savings
the sum of private savings and the budget balance, is the total amount of savings generated within the economy
real wage
the wage rate divided by the price level
financial risk
uncertainty about future outcomes that involve financial losses and gains
default
when a borrower fails to make payments as specified by the loan or bond contract
unit-of-account costs
Arise from the way inflation makes money a less reliable unit of measure
mutual fund
a financial intermediary that creates a stock portfolio and then resells shares of this portfolio to individual investors
bank
a financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance the illiquid investment spending needs of borrowers
market basket
a hypothetical set of consumer purchases of goods and services
loan
a lending agreement between an individual leader and an individual borrower
aggregate price level
a measure of the overall level of prices in the economy
pension fund
a type pf mutual fund that holds assets in order to provide retirement income to its members
savings-investment spending identity
savings and investment spending are always equal for the economy as a whole
life insurance company
seems policies that guarantee a payment to a policyholder's beneficiaries when the policyholder dies
budget deficit
the difference between tax revenue and government spending when government spending excess tax revenue
budget surplus
the difference between tax revenue and government spending when tac revenue exceeds government spending
transaction costs
the expenses of negotiating and executing a deal
shoe-leather costs
the increased costs of transactions caused by inflation
capital inflow
the net inflow of funds into a country
real interest rate
the nominal interest rate minus the rate of inflation
inflation rate
the percent change per year in a price index- typically the consumer price index
