Financial Terms
Excess Demand

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Definition of Excess Demand

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Excess Demand

A situation in which demand exceeds supply.

Related Terms:

Cost-Push Inflation

Inflation whose initial cause is cost increases rather than excess demand. See also demand-pull inflation.

Demand-Pull Inflation

Inflation whose initial cause is excess demand rather than cost increases. See also cost-push inflation.


The absence of equilibrium. Disequilibrium implies excess demand or excess supply and pressure for change.

Price Adjuster

A firm that reacts to excess supply or excess demand by adjusting price rather than quantity. Contrast with quantity adjuster.

Quantity Adjuster

A firm that reacts to excess supply or excess demand by adjusting quantity rather than price. Contrast with price adjuster.

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.

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What a company collected when it sold stock for more than the par value per share.

Capital in excess par

Amounts in excess of the par value or stated value that have been paid by the public to acquire stock in the company; synonymous with additional paid-in capital.

Cost Plus Estimated Earnings in Excess of Billings

Revenue recognized to date under the percentage-of-completion method in excess of amounts billed. Also known as unbilled accounts


An amount desired, in the sense that people are willing and able to pay to obtain this amount. Always associated with a given price.

Demand Deposit

A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.

Demand Loan

A loan which must be repaid in full on demand.

Demand Management Policy

Fiscal or monetary policy designed to influence aggregate demand for goods and services.

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Demand master notes

Short-term securities that are repayable immediately upon the holder's demand.

Demand shock

An event that affects the demand for goods in services in the economy.

Excess Capacity

Unused production capacity.

Excess reserves

Any excess of actual reserves above required reserves.

Excess Reserves

Reserves of commercial banks in excess of those they are legally required to hold.

Excess return on the market portfolio

The difference between the return on the market portfolio and the
riskless rate.

Excess returns

Also called abnormal returns, returns in excess of those required by some asset pricing model.

Excess Supply

A situation in which supply exceeds demand.

Hedging demands

demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.

Money market demand account

An account that pays interest based on short-term interest rates.

Precautionary demand (for money)

The need to meet unexpected or extraordinary contingencies with a
buffer stock of cash.

Speculative demand (for money)

The need for cash to take advantage of investment opportunities that may arise.

Transaction demand (for money)

The need to accommodate a firm's expected cash transactions.

Variable rated demand bond (VRDB)

Floating rate bond that can be sold back periodically to the issuer.

Warehouse demand

The demand for a part by an outlying warehouse.

Insured Retirement Plan

This is a recently coined phrase describing the concept of using Universal Life Insurance to tax shelter earnings which can be used to generate tax-free income in retirement. The concept has been described by some as "the most effective tax-neutralization strategy that exists in Canada today."
In addition to life insurance, a Universal Life Policy includes a tax-sheltered cash value fund that cannot exceed the policy's face value. Deposits made into the policy are partially used to fund the life insurance and partially grow tax sheltered inside the policy. It should be pointed out that in order for this to work, you must make deposits into this kind of policy well in excess of the cost of the underlying insurance. Investment of the cash value inside the policy are commonly mutual fund type investments. Upon retirement, the policy owner can draw on the accumulated capital in his/her policy by using the policy as collateral for a series of demand loans at the bank. The loans are structured so the sum of money borrowed plus interest never exceeds 75% of the accumulated investment account. The loans are only repaid with the tax free death benefit at the death of the policy holder. Any remaining funds are paid out tax free to named beneficiaries.
Recognizing the value to policy holders of this use of Universal Life Insurance, insurance companies are reworking features of their products to allow the policy holder to ask to have the relationship of insurance to investment growth tracked so that investment growth inside the policy may be maximized. The only potential downside of this strategy is the possibility of the government changing the tax rules to prohibit using a life insurance product in this manner.

Price Flexibility

Ease with which prices adjust in response to excess supply or demand.

Wage Flexibility

Ease with which wages adjust in response to excess supply or demand.







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