Glossary Terms:

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

An arrangement by which a bank holds funds on behalf of a depositor. Also, the balance of funds held under such an arrangement, credited to and subject to withdrawal by the depositor.

The Federal Reserve's governing and monetary policy-making body; consists of seven governors appointed by the President to staggered 14-year terms.

A certificate of indebtedness issued by a government or a publicly held corporation, promising to repay borrowed money to the lender at a fixed rate of interest and at a specified time.

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.

In the context of credit transactions, capacity 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 and future earnings relative to current debt. High earnings and low debt, for example, indicate a strong capacity to make payments on the loan in question.

A written order to a financial institution directing the financial institution to pay a stated amount of money, as instructed, from the customer's account.

Decision made or course of action taken when faced with a set of alternatives.

Attempts by two or more individuals or organizations to acquire the same goods, services, or productive and financial resources. Consumers compete with other consumers for goods and services. Producers compete with other producers for sales to consumers.

The money in circulation in any country.

A conclusion reached after considering alternatives and their results.

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

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.

Payments earned by households for selling or renting their productive resources. May include salaries, wages, interest and dividends.

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).

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

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

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.

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

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.

The study of economics concerned with the economy as a whole, involving aggregate demand, aggregate supply, and monetary and fiscal 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.

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.

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.

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

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.

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

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

The amount of output (goods and services) produced per unit of input (productive resources) used.

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).

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

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.

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

Effort applied to achieve a purpose or result, often for pay; skills and knowledge put to use to get something done; employment at a job or in a position; occupation, profession, business, trade, craft, etc.