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54 Cards in this Set
- Front
- Back
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Net worth
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The value of all assets minus all liabilities
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Cycles
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Periodic, irregular up and down movements of economic activity that take place over a period of 2 to 6 years
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Real estate cycle two phases
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Expansion (recovery or boom) and contraction (recession or bust)
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Real estates cycle two turning points
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Points are peaks and troughs
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Expansion
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An increase in the pace of economic activity
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Contraction
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A slowdown in the pace of economic activity
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Peak
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The upper turning point of a business cycle
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Trough
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The lower turning point of a business cycle
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Finance
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Can be defined as the commercial activity of providing funds and capital to a borrower
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Real estate finance
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Provides the flow of money and credit needed to complete transactions for the purchase and/or development of real property
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The markets, institutions, and instruments necessary for those transactions
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The study of real estate finance includes _______
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Market
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Can be defined as trade in a specified commodity
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Financial market
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Allows people to buy and sell financial securities and commodities relatively easily
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Market economy
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An economy that relies primarily on interactions between buyers and sellers to allocate resources
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Money markets, capital markets, and commodities markets
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Financial markets are divided into different subtypes:
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Money market
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The interaction of buyers and sellers of short-term money market instruments such as short-term financing and securities
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Capital market
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The market in which long-term or intermediate-term securities are traded by buyers and sellers. These securities take more than 1 year to mature. Consist of primary markets and secondary markets. Consist of markets for stocks and bonds
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Stock markets
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Provide financing through the issuance and trading of shares or common stock
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Bond markets
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Provide financing through the issuance and trading of bonds
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Money
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Any generally accepted medium of exchange and unit of account. Synonym for capital
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Currency
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Refers to a country's official unit of monetary exchange. It is the minted coins and paper money issued by a government for legal exchange or tender
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Interest
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The charge for the use of money/rent paid to use someone else’s money
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Compound interest
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The interest paid on original principal and on the accrued and unpaid interest that accumulates as the debt matures. It is the interest that interest earns
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Yield
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The return on investment stated as a percentage
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Capital
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Consists of equity (one’s own money) and debt (borrowed money)
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Equity
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An owner's financial interest in real or personal property at a specific moment in time. In real estate, it is the difference between what a property is worth and what the owner owes against that property
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Debt
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A dollar amount that is borrowed from another party, usually under specific terms. It can be secured or unsecured
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Secured debt
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A debt owed to a creditor that is secured by collateral
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Collateral
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Something of value given as security for a debt. A good example of this is mortgage debt or a car loan
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Unsecured debt
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Which is a debt that is not connected to any specific piece of property. Instead, the creditor may satisfy the debt against the borrower rather than just the collateral
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Bond
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A debt instrument
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Money supply, or money stock
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The total amount of money available for transactions and investment in the economy. It consists of currency in circulation, money in checking accounts, deposits in savings, and other liquid assets
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Liquid assets
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Securities and financial instruments that are converted easily and quickly into cash. Include certificates of deposit (CDs), stocks, bonds, mortgage-backed securities, and a variety of other financial assets. Real estate is not considered ___ and, as a result, is not part of the money supply
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M1 and M2 (with M1 being the most liquid)
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The money supply is categorized by how quickly the asset can be converted into cash. The Federal Reserve Board tracks and publishes the money supply. Currently, it is measured two different ways _____&_____
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Monetary aggregates
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The money supply is categorized by how quickly the asset can be converted into cash. The Federal Reserve Board tracks and publishes the money supply. Currently, it is measured two different ways—M1 and M2—with M1 being the most liquid. The categories frequently are referred to as
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Supply
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The quantity of a product on the market that is available for consumption at a particular time at a particular price
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Demand
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The desire to possess plus the ability to buy
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Demand has two components:
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(1) the desire for something and (2) the ability to pay for it. Both components must be present before one unit of demand exists, but the latter is more important than the former.
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Monetary policy
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Influences the cost and availability of credit to promote economic growth, full employment, and price stability. It works by affecting demand across the economy—that is, people’s and firms’ willingness to spend on goods and services. he Federal Reserve System is responsible for the __________
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Fiscal policy
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the government policy on taxes and government spending and affects demand. U.S. Treasury is responsible for the ________
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Federal Reserve System (the Fed)
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The nation’s central bank. A bank for other banks and for the federal government. Responsible for regulating the flow of money and credit. It provides a safe and efficient method of transferring funds throughout the banking system. It distributes currency and coin, processes checks, and offers electronic forms of payment
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Structure of the Federal Reserve System
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The Federal Reserve System consists of twelve Federal Reserve Banks (Reserve Banks) located in major cities throughout the United States. These banks are under the supervision of the Board of Governors in Washington, D.C.
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Board of Governors (BOG)
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Oversees the Federal Reserve System. It is made up of seven members who are appointed by the President and confirmed by the Senate
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Federal Reserve Bank (Reserve Bank)
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Stores currency and coin, processes checks and electronic payments, and operates a nationwide payments system to distribute the nation’s currency and coin
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Funds transfer and the automated clearinghouse
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The Reserve Banks provide two electronic payment services:
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Funds transfer service
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Provides a communications link among financial institutions and government agencies
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Automated clearinghouse (ACH)
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Provides a nationwide network to exchange paperless payments among financial institutions and government agencies. Accommodates a wide range of recurring corporate and consumer transactions, such as payroll deposit, electronic bill payment, insurance payments, and Social Security disbursements
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Fed funds rate
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The rate at which depository institutions trade balances at the Federal Reserve. The Fed influences the supply of money and credit available by raising and lowering the amount of reserves that banks are required to hold and the discount rate at which they can borrow money from the Fed. The Fed also trades government securities (called repurchase agreements) to take money out of or put it into the system. This is called open market operations
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Reserve requirements
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Refer to a certain percentage of each deposit in a bank that must be set aside as a reserve
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Discount rate
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The interest rate that is charged by the Federal Reserve to its member banks for borrowing money. A decrease in the discount rate allows more bank borrowing from the Fed
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Prime rate
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The rate the bank charges its strongest customers (those with the highest credit ratings), is heavily influenced by the discount rate
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Federal Open Market Committee (FOMC)
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Consists of twelve members—seven members from the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the other eleven Reserve Bank presidents. The purpose of the FOMC is to set the nation’s monetary policy. It does this by overseeing the open market operations
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Open market operations
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Refer to the purchases and sales of U.S. Government and federal agency securities
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U.S. Department of the Treasury
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Serves as a major policy advisor to the President and has primary responsibility for participating in the formulation of broad fiscal policies that have general significance for the economy. The government uses fiscal policy to regulate the total level of economic activity within a nation. In addition, the Secretary helps formulate domestic and international financial, economic, and tax policies and helps manage the public debt
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