Definition of Stagflation

Stagflation

Simultaneous existence of high inflation and high unemployment, or simultaneous existence of rising inflation and r sing unemployment.

Closing purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short position in
a stock, or in a given series of options.

Closing range

Also known as the range. The high and low prices, or bids and offers, recorded during the
period designated as the official close. Related: settlement price.

Closing sale

A transaction in which the seller's intention is to reduce or eliminate a long position in a stock,
or a given series of options.

Corporate processing float

The time that elapses between receipt of payment from a customer and the
depositing of the customer's check in the firm's bank account; the time required to process customer
payments.

Exercising the option

The act buying or selling the underlying asset via the option contract.

Hell-or-high-water contract

A contract that obligates a purchaser of a project's output to make cash
payments to the project in all events, even if no product is offered for sale.

High-coupon bond refunding

Refunding of a high-coupon bond with a new, lower coupon bond.

High price

The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.

High-yield bond

See:junk bond.

Highly leveraged transaction (HLT)

Bank loan to a highly leveraged firm.

Inflation

The rate at which the general level of prices for goods and services is rising.

Inflation risk

Also called purchasing-power risk, the risk that changes in the real return the investor will
realize after adjusting for inflation will be negative.

Inflation uncertainty

The fact that future inflation rates are not known. It is a possible contributing factor to
the makeup of the term structure of interest rates.

Inflation-escalator clause

A clause in a contract providing for increases or decreases in inflation based on
fluctuations in the cost of living, production costs, and so forth.

In-house processing float

Refers to the time it takes the receiver of a check to process the payment and
deposit it in a bank for collection.

Manufactured housing securities (MHSs)

Loans on manufactured homes - that is, factory-built or
prefabricated housing, including mobile homes.

Net advantage to leasing

The net present value of entering into a lease financing arrangement rather than
borrowing the necessary funds and buying the asset.

Purchasing power parity

The notion that the ratio between domestic and foreign price levels should equal
the equilibrium exchange rate between domestic and foreign currencies.

Purchasing-power risk

Related: inflation risk

Relative purchasing power parity (RPPP)

Idea that the rate of change in the price level of commodities in
one country relative to the price level in another determines the rate of change of the exchange rate between
the two countries' currencies.

Reversing trade

Entering the opposite side of a currently held futures position to close out the position.

SIMEX (Singapore International Monetary Exchange)

A leading futures and options exchange in singapore.

Single country fund

A mutual fund that invests in individual countries outside the United States.

Single factor model

A model of security returns that acknowledges only one common factor.
See: factor model.

Single index model

A model of stock returns that decomposes influences on returns into a systematic factor,
as measured by the return on the broad market index, and firm specific factors.

Single-index model

Related: market model

Single-payment bond

A bond that will make only one payment of principal and interest.

Single-premium deferred annuity

An insurance policy bought by the sponsor of a pension plan for a single
premium. In return, the insurance company agrees to make lifelong payments to the employee (the
policyholder) when that employee retires.

Unemployment rate

The ratio of the number of people classified as unemployed to the total labor force.

Warehousing

The interim holding period from the time of the closing of a loan to its subsequent marketing to
capital market investors.

Closing entries

The entries that transfer the balances in the revenue, expense, and dividend accounts to Retained earnings and zero out the revenue, expense, and dividend accounts for the next period.

Reversing entry

An entry that is made at the beginning of the current period so that the systems and procedures do not have to be altered to allow for previously accrued items.

high-low method

a technique used to determine the fixed
and variable portions of a mixed cost; it uses only the highest
and lowest levels of activity within the relevant range

processing time

the actual time consumed performing the
functions necessary to manufacture a product

purchasing cost

the quoted price of inventory minus any
discounts allowed plus shipping charges

simultaneous engineering

an integrated approach in which
all primary functions and personnel contributing to a product’s
origination and production are involved continuously
from the beginning of a product’s life

High-low-close chart

A financial chart usually used to plot the high, low,
open, and close price of a security over time. Plots are vertical lines whose top
is the high, bottom is the low, open is a short horizontal tick to the left, and
close is a short horizontal tick to the right.

inflation

Rate at which prices as a whole are increasing.

purchasing power parity (PPP)

Theory that the cost of living in different countries is equal, and exchange rates adjust to offset inflation differentials across countries.

Cost-Push Inflation

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

Cyclical Unemployment

unemployment that increases when the economy enters a recession and decreases when the economy enters a boom.

Demand-Pull Inflation

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

Disinflation

A reduction in the rate of inflation.

Frictional Unemployment

unemployment associated with people changing jobs or quitting to search for new jobs.

High-Powered Money

See money base.

Housing Start

A new house on which construction has just begun.

Hyperinflation

Extremely high inflation.

Inflation

A sustained increase in the general price level. The inflation rate is the percentage rate of change in the price level.

Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.

Institutionally Induced Unemployment

unemployment due to institutional phenomena such as the degree of labor force unionization, the level of discrimination, and government policies such as unemployment insurance programs, minimum wages, or regulations on business.

Natural Rate of Unemployment (NRU)

The level of unemployment characterizing the economy in long-run equilibrium, determined by the levels of frictional, structural, and institutionally induced unemployment. At this rate of unemployment, inflation should be constant, so it is sometimes called the nonaccelerating inflation rate of unemployment, or NAIRU.

Purchasing Power Parity

Theory that says that over the long run exchange rate changes offset any difference between foreign and domestic inflation. This result assumes that the real exchange rate remains constant, something that is not true even in the long run.

Structural Unemployment

unemployment due to a mismatch between the skills or location of labor and the skills or location required by firms.

Unemployment Insurance

A program in which workers and firms pay contributions and workers collect benefits if they become unemployed.

Unemployment rate

Fraction of the labor force that is not employed.

Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.

Direct-Response Advertising

Advertising designed to elicit sales to customers who can be
shown to have responded specifically to the advertising in the past. Such costs can be capitalized
when persuasive historical evidence permits formulation of a reliable estimate of the future revenue
that can be obtained from incremental advertising expenditures.

Single-level bill of material

A list of all components used in a parent item.

Single sourcing

Using a single supplier as the only source of a part.

Stockless purchasing

The purchase of material for direct delivery to the production
area, bypassing any warehouse storage.

High-Risk Small Business

Firm viewed as being particularly subject to risk from an investors perspective.

Leasing

Contract granting use of real estate, equipment, or other fixed assets for a specified time in exchange for payment, usually in the form of rent. The owner of the leased property is called the lessor, the user the lessee.
See Also:
* Capital Lease
* Operating Lease
* Sale and Leaseback

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