a depository bank that accepts deposits and is covered by deposit insurance.

when a borrower fails to make payments as specified by a loan or bond contract.

the total value of financial assets in the economy that are considered money.

a good used as a medium of exchange that has intrinsic value in other uses.

a bank that trades in financial assets and is not covered by deposit insurance.

the interest rates on financial assets that mature within a year.

a medium of exchange with no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods.

(on a project) is the profit earned on the project expressed as a percentage of its cost.

cash held by the public.

describes an asset if it can be quickly converted into cash without much loss of value.

model that says that the interest rate is determined by the supply and demand for money.

the present value of current and future benefits minus the present value of current and future costs.

the ratio of the money supply to the monetary base; indicates the total number of dollars created in the banking system by each $1 addition to the monetary base.

the smallest fraction of deposits that the Federal Reserve allows banks to hold.

interest rates on financial assets that mature a number of years in the future.

rules set by the Federal Reserve that determine the required reserve ratio for banks.

a medium of exchange whose value derives entirely from its official status as a means of payment.

any asset that can easily be used to purchase goods and services.

the difference between tax revenue and government spending when government spending exceeds tax revenue.

allows banks that fall short of the reserve requirement to borrow funds from banks with excess reserves.

an asset created by pooling individual loans and selling shares in that pool.

an institution that oversees and regulates the banking system and controls the monetary base.

the expenses of negotiating and executing a deal.

(of $1 realized one year from now) $1/(1 + r); the amount of money you must lend out today in order to have $1 in one year. It is the value to you today of $1 realized one year from now.

sells policies that guarantee a payment to a policyholder’s beneficiaries when the policyholder dies.

a financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance borrowers’ investment spending on illiquid assets.

an overall measure of the money supply.

the currency that banks hold in their vaults plus their deposits at the Federal Reserve.

a requirement to pay money in the future.

a phenomenon in which many of a bank’s depositors try to withdraw their funds due to fears of a bank failure.

financial assets that can’t be directly used as a medium of exchange but can be readily converted into cash or checkable bank deposits.

shows the relationship between the quantity of money demanded and the interest rate.

investment in several different assets with unrelated, or independent, risks.

guarantees that a bank’s depositors will be paid even if the bank can’t come up with the funds, up to a maximum amount per account.

the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year.

a type of deposit-taking bank, usually specialized in issuing home loans.

a claim on a tangible object that gives the owner the right to dispose of the object as he or she wishes.

the difference between tax revenue and government spending.

a measure used to set prices and make economic calculations.

shows the relationship between the quantity of money supplied and the interest rate.

a purchase or sale of government debt by the Fed.

the interest rate the Fed charges on loans to banks.

an institution that transforms the funds it gathers from many individuals into financial assets.

the amount to which some current amount of money will grow as interest accumulates over a specified period of time.

the interest rate that banks charge other banks for loans, as determined in the federal funds market.

uncertainty about future outcomes that involve financial losses and gains.

a paper claim that entitles the buyer to future income from the seller.

a means of holding purchasing power over time.

the sum of private savings and the budget balance; the total amount of savings generated within the economy.

the difference between tax revenue and government spending when tax revenue exceeds government spending.

a hypothetical market that brings together those who want to lend money and those who want to borrow money.

bank accounts on which people can write checks.

the channel through which the Federal Reserve lends money to banks.

the general principle that an increase in expected future inflation drives up the nominal interest rate by the same number of percentage points, leaving the expected real interest rate unchanged.

a tool for analyzing a business’s financial position by showing, in a single table, the business’s assets (on the left) and liabilities (on the right).

a financial intermediary that creates a stock portfolio and then resells shares of this portfolio to individual investors.

the sum of currency in circulation and bank reserves.

occurs when a government deficit drives up the interest rate and leads to reduced investment spending.

an accounting fact that states that savings and investment spending are always equal for the economy as a whole.

a lending agreement between an individual lender and an individual borrower.

an asset that individuals acquire for the purpose of trading for goods and services rather than for their own consumption.

describes an asset if it cannot be quickly converted into cash without much loss of value.

a nonprofit institution that invests the savings of members and provides them with income when they retire.

a claim on a bank that obliges the bank to give the depositor his or her cash when demanded.

a bank’s reserves over and above its required reserves.

the fraction of bank deposits that a bank holds as reserves.

the total inflow of foreign funds minus the total outflow of domestic funds to other countries.

the value of a household’s accumulated savings.