Term
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Definition
"a promise to make specified payments on specified dates" |
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Term
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Definition
What we use to pay for goods and services and factors ofproduction and to make financial transactions. |
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Term
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Definition
Funds that firms use to buy physical capital |
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Term
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Definition
Total amount spent on new capital |
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Term
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Definition
change in value of capital
= gross investment minus depreciation |
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Term
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Definition
| legal contract that gives ownership of a home to the lender in the event that the borrower fails to meet the agreed loan payments. |
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Term
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Definition
| works both sides of the market, both a borrower and a lender |
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Term
| what are the 5 financial institutions? |
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Definition
| investment banks, commercial banks, government sponsered mortgage lenders, pension funds, insurance companies |
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Term
| Government sponsered mortage lenders |
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Definition
1) Fannie Mae (Federal National Mortgage Association)
2) Freddie Mac (Federal Home Loan Association) |
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Term
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Definition
| Total market value of what it has lent - the market value of what it has borrowed. (assets- liabilities= net worth) |
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Term
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Definition
- insolvent (out of biz)
+ sovlent can remain in biz
or... sovlent but illipquid (long term loans when there is a demand for funds. A bank avoids becoming insolvent by borrowing cash from other banks... unless everybody is hard up.) |
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Term
| If the asset price rises... |
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Definition
| the interest rate falls. INVERSE RELATIONSHIP! |
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Term
| If the interest rate rises |
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Definition
| the asset price falls, and debts become harder to pay. The net worth of the fin.institution falls. |
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Term
| market for loanable funds |
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Definition
| aggregate of all the individual fin. markets. (all the institutions lumped together) |
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Term
| Where do the funds that finance institutions come from? |
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Definition
1) households
2) government budget surplus (haha)
3) borrowing from the rest of the world |
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