Glossary Terms:

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

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

An itemized statement listing the total assets and total liabilities of a given business to portray its net worth at a given moment in time.

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

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

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.

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.

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).

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.

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.

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

Something of value (often a house or a car) pledged by a borrower as security for a loan. If the borrower fails to make payments on the loan, the collateral may be sold; proceeds from the sale may then be used to pay down the unpaid debt.

A legal entity owned by shareholders whose liability for the firm's losses is limited to the value of the stock they own.

An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something.

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.

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

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.

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

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

The taxing and spending plan of the national government.

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.

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

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

Tangible objects that satisfy economic wants.

Accommodation in houses, apartments, etc.

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).

A new idea or method.

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.

An itemized list of goods held by a person or business. Also a quantity of goods held in stock.

The process of putting money someplace with the intention of making a financial gain. Investment possibilities include stocks, bonds, mutual funds, real estate, and other financial instruments or ventures.

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.

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

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.

"Gifts of nature" that can be used to produce goods and services; for example, oceans, air, mineral deposits, virgin forests and actual fields of land. When investments are made to improve fields of land or other natural resources, those resources become, in part, capital resources. Also known as natural resources.

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.

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.

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

A pool of money used by a company to purchase a variety of stocks, bonds or money market instruments. Provides diversification and professional management for investors.

The current value of a person's assets minus liabilities.

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

Certificates of various denominations generally recognized and accepted as a medium of exchange within a nation and elsewhere. Paper money is issued and backed by national governments or, in the case of the euro, by a group of governments.

A person's or an institution's collection of savings and investments.

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.

An original amount of money invested or lent.

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.

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

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 money a business receives from customers who buy its goods and services. Not to be confused with profit.

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.

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.

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

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

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.