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

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.

A spending-and-savings plan, based on estimated income and expenses for an individual or an organization, covering a specific time period.

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

Two sectors of the circular flow. Businesses hire resources from households; the payments for these resources represent household income. Households spend their income for goods and services produced by the businesses; household spending represents revenue for businesses.

Money in the form of paper currency or coins (as distinct from checks, money orders or credit).

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.

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.

A result or effect of an action or decision; may be positive or negative.

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

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

The money in circulation in any country.

A conclusion reached after considering alternatives and their results.

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

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

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

A bank's cash reserves beyond the required reserves, which can be loaned.

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.

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

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.

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

Tangible objects that satisfy economic wants.

Spending by all levels of government on goods and services; includes categories like military, schools and roads.

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

Accommodation in houses, apartments, etc.

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

Payments made by individuals and corporations to the federal government (and to some state and local governments) based on income received (both earned and unearned).

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.

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).

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

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

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.

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

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.

A process of manufacturing, growing, designing, or otherwise using productive resources to create goods or services used to to satisfy a want.

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).

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

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

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

The chance of losing money.

An exchange of goods or services for money.

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

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.

Compulsory payments to governments by households and businesses.

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.