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financial markets

markets in which funds are transferred from people who have an excess of available funds to people who have a shortage

security (financial instrument)

a claim on the issue's future income or assets


any financial claim or piece of property that is subject to ownership


a debt security that promises to make payments periodically for a specified period of time

interest rate

the cost of borrowing or the price paid for the rental of funds (%)

common stock

represents a share of ownership in a corporation

foreign exchange market

where the conversion of money takes place, and where the exchange rate is determined

foreign exchange rate

price of one country's currency in terms of another's

financial intermediaries

institutions that borrow funds from people who have saved and in turn make loans to others


financial institutions that accept deposits and make loans


the deliveering of financial services electronically

money/money supply

anything that is generally accepted in payment for goods or services or in the repayment of debts

aggregate output

total production of goods and services

unemployment rate

the percentage of the available labor force unemployed

business cycles

the upward and downward movement of aggregate output produced in the economy


periods of declining aggregate output

monetary theory

the theory that relates changes in the quantity of money to changes in aggregate economic activity and the price level

aggregate price level (price level)

the average price of goods and services in an economy


a continual increase in the price level

inflation rate

the rate of change of the price level, usually measured as a % change per year)

monetary policy

the management of money and interest rates

central banks (Federal Reserve System)

the organization responsible foe the conduct of a nation's monetary policy

fiscal policy

involves decisions about gov. spending and taxation

budget deficit

the excess of gov. expenditures over tax revenues for a particular time period, typically a year

budget surplus

tax revenues exceed gov. expenditures

gross domestic output (GDP)

a measure of aggregate output

aggregate income

the total income of factors of production (land, labor, and capital)

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