Glossary Terms:

Focus on Economic Data: The Federal Reserve and Monetary Policy, March 20, 2013

Glossary terms from:
http://www.econedlink.org/e1152


Alternative

One of many choices or courses of action that might be taken in a given situation.

Asset

Something of monetary value owned by an individual or an organization.

Bank

A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.

Bank Reserves

The percentage of a bank's deposits that it keeps on hand, i.e., does not lend out.

Banking

The industry involved with conducting financial transactions. Also, conducting business with a bank, e.g., maintaining a checking or savings account or obtaining a loan.

Borrow

To receive and use something belonging to somebody else, with the intention of returning or repaying it--often with interest in the case of borrowed money.

Business

Any activity or organization that produces or exchanges goods or services for a profit.

Business Cycles

Fluctuations in the overall rate of national economic activity with alternating periods of expansion and contraction; these vary in duration and degrees of severity; usually measured by real gross domestic product (GDP).

Capital

Resources and goods made and used to produce other goods and services. Examples include buildings, machinery, tools and equipment. In the context of credit transactions, capital is one of the Three Cs of Credit. It is an indicator of how creditworthy a prospective borrower is likely to be as determined by the borrower's current financial assets and net worth.

Consumers

People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services.

Consumption

Spending by households on goods and services. The process of buying and using goods and services.

Credit

The opportunity to borrow money or to receive goods or services in return for a promise to pay later.

Debt

Money owed to someone else. Also the state or condition of owing money. Can be individual, corporate or government debt.

Decision

A conclusion reached after considering alternatives and their results.

Demand

The quantity of a good or service that buyers are willing and able to buy at all possible prices during a period of time.

Deposit

Money put into a financial account. Also, to place money in a financial account.

Discount Rate

The interest rate the Federal Reserve charges commercial banks for loans.

Dividend

A share of a company's net profits paid to stockholders.

Economic Growth

An increase in real output as measured by real GDP or per capita real GDP.

Economics

The study of how people, firms and societies choose to allocate scarce resources with alternative uses.

Federal Reserve

The central bank of the United States. Its main function is controlling the money supply through monetary policy. The Federal Reserve System divides the country into 12 districts, each with its own Federal Reserve bank. Each district bank is directed by its nine-person board of directors. The Board of Governors, which is made up of seven members appointed by the President and confirmed by the Senate to 14-year terms, directs the nation's monetary policy and the overall activities of the Federal Reserve. The Federal Open Market Committee is the official policy-making body; it is made up of the members of the Board of Governors and five of the district bank presidents.

Firms

Economic units that demand productive resources from households and supply goods and services to households and government agencies.

Fiscal Policy

Changes in the expenditures or tax revenues of the federal government, undertaken to promote full employment, price stability and reasonable rates of economic growth.

Full Employment

The natural rate of employment; generally considered to be about 93-95 percent of the labor force, allowing for frictional unemployment of 5-7 percent.

Goal

Something a person or organization plans to achieve in the future; an aim or desired result.

Households

Individuals and family units that buy goods and services (as consumers) and sell or rent productive resources (as resource owners).

Housing

Accommodation in houses, apartments, etc.

Inflation

A rise in the general or average price level of all the goods and services produced in an economy. Can be caused by pressure from the demand side of the market (demand-pull inflation) or pressure from the supply side of the market (cost-push inflation).

Interest

Money paid regularly, at a particular rate, for the use of borrowed money.

Interest Rate

The price paid for using someone else's money, expressed as a percentage of the amount borrowed.

Investment

The purchase of capital goods (including machinery, technology or new buildings) that are used to produce goods and services. In personal finance, the amount of money invested in stocks, bonds, mutual funds and other investment instruments.

Job

A piece of work usually done on order at an agreed-upon rate. Also a paid position of regular employment.

Labor

The quantity and quality of human effort available to produce goods and services.

Labor Market

The labor supply and labor demand curves. The intersection of the labor supply and labor demand curves determines the equilibrium wage and the quantity of hours people work at this equilibrium wage.

Lend

To grant someone the use of something, on condition that the object borrowed or its equivalent will be returned (often with interest, in the case of money).

Liquidity

The ease with which savings or investments can be turned into cash.

Markets

Places, institutions or technological arrangements where or by means of which goods or services are exchanged. Also, the set of all sale and purchase transactions that affect the price of some good or service.

Monetary Policy

Changes in the supply of money and the availability of credit initiated by a nation's central bank to promote price stability, full employment and reasonable rates of economic growth.

Money

Anything that is generally accepted as final payment for goods and services; serves as a medium of exchange, a store of value and a standard of value. Characteristics of money are portability, stability in value, uniformity, durability and acceptance.

Money Supply

Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.

Mortgage

A special type of loan for the purchase of a house or other real estate.

Open Market Operations

The buying and selling of government bonds by the Federal Reserve to control bank reserves and the money supply.

Price

The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.

Price Level

The weighted average of the prices of all goods and services in an economy; used to calculate inflation.

Price Stability

The absence of inflation or deflation; a broad social goal and criterion for measuring the performance of an economic system.

Principal

An original amount of money invested or lent.

Product

A good or service that can be used to satisfy a want.

Purchases

In a credit arrangement, the total amount spent during the billing cycle.

Recession

A decline in the rate of national economic activity, usually measured by a decline in real GDP for at least two consecutive quarters (i.e., six months).

Regulation

Economic regulation is the prescription of price and output for a specific industry, often a natural monopoly. Social regulation is the prescription of health, safety, performance, environmental, output and job standards across several industries.

Reserve Requirements

The fraction of banks' deposits that they are required by law to keep on hand or with the Federal Reserve.

Resources

The basic kinds of resources used to produce goods and services: land or natural resources, human resources (including labor and entrepreneurship), and capital.

Return

Earnings from an investment, usually expressed as an annual percentage.

Save

To keep money for future use; to divert money from current spending to a savings account or another form of investment.

Services

Activities performed by people, firms or government agencies to satisfy economic wants.

Supply

The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time.

Surplus

The situation that results when the quantity supplied of a product exceeds the quantity demanded. Generally happens because the price of the product is above the market equilibrium price.

Unemployment

The number of people without jobs who are actively seeking work.

Unemployment Rate

The number of unemployed people, expressed as a percentage of the labor force.