|Quantity Theory of Money|
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Definition of Quantity Theory of Money
Quantity Theory of Money
theory that velocity is constant, and so a change in money supply will change nominal income by the same percentage. Formalized by the equation Mv = PQ.
The analysis of principal-agent relationships, wherein one person, an agent, acts on behalf of
An alternative model to the capital asset pricing model developed by
An option is at-the-money if the strike price of the option is equal to the market price of the
Security prices sometimes move wildly above their true values.
Also called the broker loan rate , the interest rate that banks charge brokers to finance
The order quantity that minimizes total inventory costs.
money that moves across country borders in response to interest rate differences and that moves
A put option that has a strike price higher than the underlying futures price, or a call option
A biased expectations theory that asserts that the implied forward
A form of the pure expectations theory which suggests that the returns on bonds
A biased expectations theory that asserts that the
Principles underlying the analysis and evaluation of rational portfolio choices
Composed of currency and coins outside the banking system plus liabilities to the deposit money banks.
Banks that raise most of their funds from the domestic and international money markets, relying less on depositors for funds.
Related: Investment management.
Related: Investment manager.
money markets are for borrowing and lending money for three years or less. The securities in
Money market demand account
An account that pays interest based on short-term interest rates.
Money market fund
A mutual fund that invests only in short term securities, such as bankers' acceptances,
Money market hedge
The use of borrowing and lending transactions in foreign currencies to lock in the
Money market notes
Publicly traded issues that may be collateralized by mortgages and MBSs.
Money purchase plan
A defined benefit contribution plan in which the participant contributes some part and
Money rate of return
Annual money return as a percentage of asset value.
M1-A: Currency plus demand deposits
In a Treasury auction, the amount by which the par value of the securities offered exceeds that of
Normal backwardation theory
Holds that the futures price will be bid down to a level below the expected
A call option is out-of-the-money if the strike price is greater than the market price
Precautionary demand (for money)
The need to meet unexpected or extraordinary contingencies with a
Preferred habitat theory
A biased expectations theory that believes the term structure reflects the
Pure expectations theory
A theory that asserts that the forward rates exclusively represent the expected
Speculative demand (for money)
The need for cash to take advantage of investment opportunities that may arise.
Static theory of capital structure
theory that the firm's capital structure is determined by a trade-off of the
Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar
Transaction demand (for money)
The need to accommodate a firm's expected cash transactions.
A market that specializes in trading short-term, low-risk, very liquid
economic order quantity (EOQ)
an estimate of the number
material quantity variance
(actual quantity X standard price) - (standard quantity allowed standard price);
standard quantity allowed
the quantity of input (in hours or some other cost driver measurement) required at standard for the output actually achieved for the period
theory of constraints (TOC)
a method of analyzing the bottlenecks
Materials quantity variance
The difference between the actual and budgeted quantities
economic order quantity
Order size that minimizes total inventory costs.
expectations theory of exchange rates
theory that expected spot exchange rate equals the forward rate.
Market for short-term financial assets.
pecking order theory
Firms prefer to issue debt rather than equity if internal finance is insufficient.
random walk theory
Security prices change randomly, with no predictable trends or patterns.
Debt levels are chosen to balance interest tax shields against the costs of financial distress.
See money base.
Any item that serves as a medium of exchange, a store of value, and a unit of account. See medium of exchange.
Cash plus deposits of the commercial banks with the central bank.
A financial market in which short-term (maturity of less than a year) debt instruments such as bonds are traded.
Change in the money supply per change in the money base.
Money Rate of Interest
See interest rate, nominal.
Neutrality of Money
The doctrine that the money supply affects only the price level, with no long-run impact on real variables.
Sale of bonds by the government to the central bank.
A firm that reacts to excess supply or excess demand by adjusting quantity rather than price. Contrast with price adjuster.
Real Business Cycle Theory
Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.
Real Money Supply
money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.
Fiat money is paper currency made legal tender by law or fiat. It is not backed by gold or silver and is not necessarily redeemable in coin. This practice has had widespread use for about the last 70 years. If governments produce too much of it, there is a loss of confidence. Even so, governments print it routinely when they need it. The value of fiat money is dependent upon the performance of the economy of the country which issued it. Canada's currency falls into this category.
This is the process by which "dirty money" generated by criminal activities is converted through legitimate businesses into assets that cannot be easily traced back to their illegal origins.
Financial market in which funds are borrowed or lent for short periods. (The money market is distinguished from the capital market, which is the market for long term funds.)
money market fund
A type of mutual fund that invests primarily in short-term debt securities maturing in one year or less. These include treasury bills, bankers’ acceptances, commercial paper, discount notes and guaranteed investment certficates.
A guaranteed form of payment in amounts up to and including $5,000. You might request a money order in order to pay for tuition fees at a university or a college, or for a magazine subscription.
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