Textbook Notes (380,765)
CA (168,209)
UTSC (19,296)
MGEC71H3 (21)
Chapter

Terminology

24 Pages
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Department
Economics for Management Studies
Course Code
MGEC71H3
Professor
Jack Parkinson

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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 party's 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 currency's 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 bank's 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.
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balance 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 country's 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) Canada's 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.
banker's 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 Canada's 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.
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budget deficit The excess of government expenditure over tax revenues.
budget surplus Excess of tax revenues over government expenditures for a particular time period.
business cycles The upward and downward movement of aggregate output produced in the economy.
call (or redemption) A redemption feature allowing issues to be "called" on specified notice.
call option An option contract that provides the right to buy a security at a specified price.
call premium Price of a call option.
Canada bonds (Canadas) Securities issued by the Government of Canada.
capital account An account that describes the flow of capital between the U.S. and other countries.
capital adequacy management A bank's decision about the amount of capital it should maintain and then acquisition of the needed capital.
capital market A financial market in which longer-term debt (generally with original maturity of greater than one year) and equity instruments are traded.
capital mobility A situation in which foreigners can easily purchase a country's assets and the country's residents can easily purchase foreign assets.
cash flow The difference between cash receipts and cash expenditures.
cash reserves (vault cash) Cash held by deposit-based financial institutions to meet the demand for cash.
cash setting The management of participants' settlement balances by means of shifting government deposits between the government's account at the Bank of
Canada and the government's accounts at the participating financial institutions.
central bank The government agency that oversees the banking system and is responsible for the amount of money and credit supplied in the economy; in Canada,
the Bank of Canada.
central bank independence Advocates of central bank independence find that inflation performance is found to be the best for countries with the most independent
central banks.
coinsurance A situation in which only a portion of losses are covered by insurance, so that the insured suffers a percentage of the losses along with the insurance
agency.
collateral Property that is pledged to the lender to guarantee payment in the event that the borrower is unable to make debt payments.
commodity money Money made up of precious metals or another valuable commodity.
common stock A share of ownership in a corporation.
compensating balance A required minimum amount of funds that a firm receiving a loan must keep in a chequing account at the lending bank.
complete crowding out The situation in which expansionary fiscal policy, such as an increase in government spending, does not lead to a rise in output because
there is an equal offsetting movement in private spending.
conflicts of interest A manifestation of the moral hazard in which one party in a financial contract has incentives to act in its own interest, rather than in the interests
of the other party.
consol (perpetuity) A perpetual bond with no maturity date and no repayment of principal that periodically makes fixed coupon payments.
constant-money-growth-rate rule A policy rule advocated by monetarists whereby the central bank keeps the money supply growing at a constant rate.
consumer durable expenditure Spending by consumers on durable items such as automobiles and household appliances.
consumer expenditure The total demand for (spending on) consumer goods and services.
consumption Spending by consumers on nondurable goods and services (including services related to the ownership of homes and consumer durables).
consumption function The relationship between disposable income and consumer expenditure.
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Description
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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