Economic Performance Quiz

A situation where the actual output of an economy is below its potential output, resulting in unemployment.

The maximum output an economy can produce with its resources, assuming full employment.

The actual level of production in an economy at a given time.

A sector of the economy where savings equal investments, and borrowing equals lending, resulting in a stable financial system.

The portion of income not spent on consumption.

Spending on capital goods, such as equipment and buildings, that adds to the economy's productive capacity.

Taking loans from financial institutions.

Providing funds to others through financial institutions.

A financial instrument where the government borrows money from the public and the bond represents a liability on the government's balance sheet.

A lender, who receives bond, which is a financial asset on the lender's balance sheet

Financial instruments with maturities up to one year.

Financial instruments with maturities longer than one year.

The probability that an issuer of a financial instrument will not pay its debt, including interest payments.

Short-term debt instruments issued by the federal government, sold at a discount.

Large-denomination time deposits issued by banks, negotiable before maturity.

Short-term debt instruments issued by banks and non-financial businesses.

Short-term sale of securities with a repurchase agreement, usually within a few days.

Overnight loans of reserve balances held by banks at the Federal Reserve to other banks.

Interest rate on federal funds; a key factor in monetary policy.

Ownership shares in corporations, with no fixed maturity.

Debt obligations issued by corporations with varying maturities.

Debt obligations issued by the federal government, with maturities up to 10 years.

Debt obligations issued by the federal government with maturities over 10 years.

Debt obligations issued by local, regional, or state governments.

Financial institutions distribute funds they collect by paying interest or offering services, making them essentially balanced.

Depository institutions lend accumulated funds, specializing in credit evaluation and risk assessment.

Depositors (people with accounts) typically have zero default risk with institutions.

Banks can reduce loan portfolio risk by lending to many borrowers.

Banks can lend to riskier borrowers because their diverse portfolios mitigate overall risk.

The possibility that a borrower might not repay a loan or fulfil an obligation.

Markets where borrowers and lenders interact directly to exchange funds, without intermediaries.

Requirement for financial instruments to have a specific face value that matches the borrower's desire to borrow or the lender's desire to lend.

Requirement where the time to repay a financial instrument matches the time the lender is willing to loan.

The relationship between the potential return on an investment and the amount of risk associated with it.

Small lenders face challenges in direct markets due to difficulties evaluating borrower creditworthiness, insufficient funds for diversification, and lack of resources to assess and monitor risk.

Small borrowers find it tough to borrow in direct markets due to high minimums for financial instruments and inadequate resources for financial transparency.

Lender who prefers lower risk levels and demands higher compensation for accepting higher levels of risk when choosing their investment portfolios.

Financial transactions directly between lenders and borrowers, bypassing financial intermediaries.

Financial transactions through intermediaries like banks, transferring funds from savers to borrowers.

The price of borrowing money, influencing spending and monetary policy.

Act as conduits, transferring funds between lenders & borrowers, buying/selling financial instruments.

Combined, total lending within all sectors equals total borrowing (overall, but not individual sector-specifically).

In the aggregate, saving equals investment.

Central bank's actions to manage money supply and interest rates to influence economic growth.

Central bank's desired interest rate level to control the economy.