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University of Toronto Scarborough
Economics for Management Studies
Jack Parkinson

accommodating policy An activist policy in pursuit of a high employment target. activist An economist who views the self-correcting mechanism through wage and price adjustment to be very slow and hence sees the need for the government to pursue active, discretionary policy to eliminate high unemployment whenever it develops. adaptive expectations Expectations of a variable based on an average of past values of the variable. advances See overdraft loans. adverse selection The problem created by asymmetric information before a transaction occurs: The people who are the most undesirable from the other partys point of view are the ones who are most likely to want to engage in the financial transaction. agency theory The analysis of how asymmetric information problems affect economic behaviour. aggregate demand The total quantity of output demanded in the economy at different price levels. aggregate demand curve A relationship between the price level and the quantity of aggregate output demanded when the goods and money markets are in equilibrium. aggregate demand function The relationship between aggregate output and aggregate demand that shows the quantity of aggregate output demanded for each level of aggregate output. aggregate income The total income of factors of production (land, labour, capital) in the economy. aggregate output The total production of final goods and services in the economy. aggregate price level The average price of goods and services in an economy. aggregate supply The quantity of aggregate output supplied by the economy at different price levels. aggregate supply curve The relationship between the quantity of output supplied in the short run and the price level. American option An option that can be exercised at any time up to the expiration date of the contract. anchor currency A currency to which other countries currencies are pegged. animal spirits Waves of optimism and pessimism that affect consumers and businesses willingness to spend. annual percentage rate The actual rate of return. appreciation Increase in a currencys value. arbitrage Elimination of a riskless profit opportunity in a market. asset A financial claim or piece of property that is a store of value. asset management The acquisition of assets that have a low rate of default and diversification of asset holdings to increase profits. asset market approach An approach of determining asset prices using stocks of assets rather than flows. asset transformation See risk sharing. asymmetric information The unequal knowledge that each party to a transaction has about the other party. at the money (trading at par) option Option whose exercise price is just equal to the current asset price. audits Certification by accounting firms that a business is adhering to standard business principles. automated banking machine (ABM) Combines in one location an ATM, an Internet connection to the banks website, and a telephone link to customer service. automated teller machine (ATM) An electronic machine that allows customers to get cash, make deposits, transfer funds from one account to another, and check balances. autonomous consumer expenditure The amount of consumer expenditure that is independent of disposable income. www.notesolution.combalance of payments A bookkeeping system for recording all payments that have a direct bearing on the movement of funds between a country and foreign countries. balance-of-payments crisis A foreign exchange crisis stemming from problems in a countrys balance of payments. balance sheet A list of the assets and liabilities of a bank (or firm) that balances: Total assets equal total liabilities plus capital. Bank Act Reform The legislation that took effect in October of 2001 regarding the policy framework of the Canadian financial services sector. bank failure A situation in which a bank cannot satisfy its obligations to pay its depositors and other creditors and so goes out of business. bank holding companies Companies that own one or more banks. Bank of Canada (the Bank) Canadas central bank. bank panic The simultaneous failure of many banks, as during a financial crisis. bank rate The interest rate the Bank of Canada charges to members of the Canadian Payments Association. bank supervision (prudential supervision) Overseeing who operates banks and how they are operated. bankers risk The risk of not holding enough reserves to make immediate and larger than normal cash payments to liability holders. banks Financial institutions that accept money deposits and make loans (such as commercial banks, savings and loan associations, and credit unions). base money The sum of the Bank of Canadas monetary liabilities (notes outstanding and bank settlement balances) and coins outstanding. Also called monetary base. Basel Accord An agreement adopted by more than 100 countries that requires banks to hold as capital at least 8% of their risk-weighted activities. Basel Committee on Banking Supervision A committee of banking officials from industrialized nations that meets under the auspices of the Bank for International Settlements in Basel, Switzerland to implement the Basel Accord. basis point One one-hundredth of a percentage point. bearer deposit notes CDs and GICs that can be traded and are in bearer form, meaning that whoever holds the instrument at maturity receives the principal and interest. behavioural finance The field of study that applies concepts from other social sciences, such as anthropology, sociology, and particularly psychology, to understand the behaviour of securities prices. Big Eight The big eight Canadian banks-Bank of Montreal, Canadian Western Bank, CIBC, Laurentian Bank, National Bank, RBC Financial Group, Scotiabank, and TD Bank Financial Group. Board of Directors of the Bank of Canada A board with fifteen members (including the governor) that is responsible for the management of the Bank. Board of Governors of the Federal Reserve System A board with seven governors (including the chairman) that plays an essential role in decision making within the Federal Reserve System. bond A debt security that promises to make payments periodically for a specified period of time. borrowed reserves The loans the central bank makes to deposit-based financial institutions. Bretton Woods system The international monetary system in use from 1945 to 1971 in which exchange rates were fixed and the U.S. dollar was freely convertible into gold (by foreign governments and central banks only). brokered deposits Deposits that enable depositors to circumvent the $100 000 limit on federal deposit insurance by breaking up a large deposit into smaller packages of less than $100 000 at each bank so that the total amount deposited is fully insured. brokers Agents for investors who match buyers with sellers. bubble A situation in which the price of an asset differs from its fundamental market value. www.notesolution.com
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