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Aggregate Supply Curve

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Definition of Aggregate Supply Curve

Aggregate Supply Curve Image 1

Aggregate Supply Curve

Combinations of price level and income for which the labor market is in equilibrium. The short-run aggregate supply curve incorporates information and price/wage inflexibilities in the labor market, whereas the long-run aggregate supply curve does not.



Related Terms:

Flattening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has decreased. Compare steepening of the yield curve and butterfly shift.


Floating supply

The amount of securities believed to be available for immediate purchase, that is, in the
hands of dealers and investors wanting to sell.


Indifference curve

The graphical expression of a utility function, where the horizontal axis measures risk and
the vertical axis measures expected return. The curve connects all portfolios with the same utilities according
to g and s .


J-curve

Theory that says a country's trade deficit will initially worsen after its currency depreciates because
higher prices on foreign imports will more than offset the reduced volume of imports in the short-run.


Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.


Non-parallel shift in the yield curve

A shift in the yield curve in which yields do not change by the same
number of basis points for every maturity. Related: Parallel shift in the yield curve.


Parallel shift in the yield curve

A shift in the yield curve in which the change in the yield on all maturities is
the same number of basis points. In other words, if the 3 month T-bill increases 100 basis points (one
percent), then the 6 month, 1 year, 5 year, 10 year, 20 year, and 30 year rates increase by 100 basis points as
well.
Related: Non-parallel shift in the yield curve.


Aggregate Supply Curve Image 2

Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.


Riding the yield curve

Buying long-term bonds in anticipation of capital gains as yields fall with the
declining maturity of the bonds.


Spot rate curve

The graphical depiction of the relationship between the spot rates and maturity.


Steepening of the yield curve

A change in the yield curve where the spread between the yield on a long-term
and short-term Treasury has increased. Compare flattening of the yield curve and butterfly shift.


Stopping curve

A curve showing the refunding rates for different points in time at which the expected value
of refunding immediately equals the expected value of waiting to refund.


Stopping curve refunding rate

A refunding rate that falls on the stopping curve.


Supply shock

n event that influences production capacity and costs in an economy.


Theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of
actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity
greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.


Visible supply

New muni bond issues scheduled to come to market within the next 30 days.


Aggregate Supply Curve Image 3

Yield curve

The graphical depiction of the relationship between the yield on bonds of the same credit quality
but different maturities. Related: Term structure of interest rates. Harvey (1991) finds that the inversions of
the yield curve (short-term rates greater than long term rates) have preceded the last five U.S. recessions. The
yield curve can accurately forecast the turning points of the business cycle.


Yield curve option-pricing models

Models that can incorporate different volatility assumptions along the
yield curve, such as the Black-Derman-Toy model. Also called arbitrage-free option-pricing models.


Yield curve strategies

Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.


Yield Curve

A graphical representation of the level of interest rates for
securities of differing maturities at a specific point of time


learning curve

a model that helps predict how labor time
will decrease as people become more experienced at performing
a task and eliminate the inefficiencies associated
with unfamiliarity


supply-chain management

the cooperative strategic planning,
controlling, and problem solving by a company and
its vendors and customers to conduct efficient and effective
transfers of goods and services within the supply chain


Discount curve

The curve of discount rates vs. maturity dates for bonds.


Par yield curve

The yield curve of bonds selling at par, or face, value.


Spot curve, spot yield curve

See Zero curve.


Yield curve

Graph of yields (vertical axis) of a particular type of security
versus the time to maturity (horizontal axis). This curve usually slopes
upward, indicating that investors usually expect to receive a premium for
securities that have a longer time to maturity. The benchmark yield curve is
for U.S. Treasury securities with maturities ranging from three months to 30
years. See Term structure.


Zero curve, zero-coupon yield curve

A yield curve for zero-coupon bonds;
zero rates versus maturity dates. Since the maturity and duration (Macaulay
duration) are identical for zeros, the zero curve is a pure depiction of supply/
demand conditions for loanable funds across a continuum of durations and
maturities. Also known as spot curve or spot yield curve.


Aggregate Supply Curve Image 4

yield curve

Graph of the relationship between time to maturity and yield to maturity.


Aggregate Demand

Total quantity of goods and services demanded.


Aggregate Demand Curve

Combinations of the price level and income for which the goods and services market is in equilibrium, or for which both the goods and services market and the money market are in equilibrium.


Aggregate Expenditure Curve

aggregate demand for goods and services drawn as a function of the level of national income.


Aggregate Production Function

An equation determining aggregate output as a function of aggregate inputs such as labor and capital.


Aggregate Supply

Total quantity of goods and services supplied.


Excess Supply

A situation in which supply exceeds demand.


Laffer Curve

curve showing how tax receipts vary with the tax rate.


Monetary Aggregate

Any measure of the economy's money supply.


Phillips Curve

Relationship between inflation and unemployment.


Real Money Supply

Money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.


Supply

An amount made available for sale, always associated with a given price.


Supply-Side Economics

View that incentives to work, save, and invest play an important role in determining economic activity by affecting the supply side of the economy.


Yield curve

A graph showing how the yield on bonds varies with time to maturity.


Aggregate planning

A budgeting process using summary-level information to
derive various budget models, usually at the product family level.


 

 

 

 

 

 

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