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Twin Deficits

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Definition of Twin Deficits

Twin Deficits Image 1

Twin Deficits

The trade deficit and the government budget deficit.



Related Terms:

Activity-based budgeting

A method of budgeting that develops budgets based on expected activities and cost drivers – see also activity-based costing.


activity-based budgeting (ABB)

planning approach applying activity drivers to estimate the levels and costs of activities necessary to provide the budgeted quantity and
quality of production


Balance of Merchandise Trade

The difference between exports and imports of goods.


Balance of trade

Net flow of goods (exports minus imports) between countries.


Balance of Trade

See balance of merchandise trade.



Balanced-Budget Multiplier

The multiplier associated with a change in government spending financed by an equal change in taxes.


Basket trades

Related: Program trades.


Twin Deficits Image 1

Block trade

A large trading order, defined on the New York Stock Exchange as an order that consists of
10,000 shares of a given stock or a total market value of $200,000 or more.


Budget

A detailed schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget.


Budget

A plan expressed in monetary terms covering a future period of time and based on a defined
level of activity.


budget

a financial plan for the future based on a single level
of activity; the quantitative expression of a company’s commitment
to planned activities and resource acquisition and use


Budget

A set of interlinked plans that quantitatively describe a company’s projected
future operations.


Budget cycle

The annual period over which budgets are prepared.


Budget deficit

The amount by which government spending exceeds government revenues.


Budget Deficit

The excess of government spending over tax receipts.


budget manual

a detailed set of documents that provides information
and guidelines about the budgetary process


Twin Deficits Image 2

budget slack

an intentional underestimation of revenues
and/or overestimation of expenses in a budgeting process
for the purpose of including deviations that are likely to
occur so that results will occur within budget limits


budget variance

the difference between total actual overhead
and budgeted overhead based on standard hours allowed
for the production achieved during the period; computed
as part of two-variance overhead analysis; also
referred to as the controllable variance



Budgetary control

The process of ensuring that actual financial results are in line with targets – see variance
analysis.


budgeted cost

a planned expenditure


budgeting

the process of formalizing plans and committing
them to written, financial terms


Capital budget

A firm's set of planned capital expenditures.


capital budget

management’s plan for investments in longterm
property, plant, and equipment


capital budget

List of planned investment projects.


Capital budgeting

The process of choosing the firm's long-term capital assets.


capital budgeting

Refers generally to analysis procedures for ranking
investments, given a limited amount of total capital that has to be allocated
among the various capital investment opportunities of a business.
The term sometimes is used interchangeably with the analysis techniques
themselves, such as calculating present value, net present value,
and the internal rate of return of investments.


Capital Budgeting

The process of ranking and selecting investment alternatives and
capital expenditures


Twin Deficits Image 3

capital budgeting

a process of evaluating an entity’s proposed
long-range projects or courses of future activity for
the purpose of allocating limited resources to desirable
projects



Capital budgeting

The series of steps one follows when justifying the decision to purchase
an asset, usually including an analysis of costs and related benefits, which
should include a discounted cash flow analysis of the stream of all future cash flows
resulting from the purchase of the asset.


capital budgeting decision

Decision as to which real assets the firm should acquire.


Cash budget

A forecasted summary of a firm's expected cash inflows and cash outflows as well as its
expected cash and loan balances.


Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal Act
containing the requirements for offering insurance to departed employees.


continuous budgeting

a process in which there is a rolling
twelve-month budget; a new budget month (twelve months
into the future) is added as each current month expires


Counter trade

The exchange of goods for other goods rather than for cash; barter.


Deficit

An excess of liabilities over assets, of losses over profits, or of expenditure over income.


Deficit

Anegative balance in the retained earnings account that is caused by cumulative
losses that exceed the amount of equity.


Deficit

See budget deficit.


financial budget

a plan that aggregates monetary details
from the operating budgets; includes the cash and capital
budgets of a company as well as the pro forma financial
statements


Flat trades

1) A bond in default trades flat; that is, the price quoted covers both principal and unpaid,
accrued interest.
2) Any security that trades without accrued interest or at a price that includes accrued
interest is said to trade flat.


Flexible budget

A method of budgetary control that flexes, i.e. adjusts the original budget by applying standard
prices and costs per unit to the actual production volume.


flexible budget

a presentation of multiple budgets that
show costs according to their behavior at different levels
of activity


Floor trader

A member who generally trades only for his own account, for an account controlled by him or
who has such a trade made for him. Also referred to as a "local".


Forward trade

A transaction in which the settlement will occur on a specified date in the future at a price
agreed upon the trade date.


Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.


Government bond

See: government securities.


Government National Mortgage Association (Ginnie Mae)

A wholly owned U.S. government corporation
within the Department of Housing & Urban Development. Ginnie Mae guarantees the timely payment of
principal and interest on securities issued by approved servicers that are collateralized by FHA-issued, VAguaranteed,
or Farmers Home Administration (FmHA)-guaranteed mortgages.


Government securities

Negotiable U.S. Treasury securities.


Government sponsored enterprises

Privately owned, publicly chartered entities, such as the Student Loan
Marketing Association, created by Congress to reduce the cost of capital for certain borrowing sectors of the
economy including farmers, homeowners, and students.


imposed budget

a budget developed by top management
with little or no input from operating personnel; operating personnel are then informed of the budget objectives and constraints


Incremental budget

A budget that takes the previous year as a base and adds (or deducts) a percentage to arrive at
the budget for the current year.


Information-motivated trades

trades in which an investor believes he or she possesses pertinent
information not currently reflected in the stock's price.


Informationless trades

trades that are the result of either a reallocation of wealth or an implementation of an
investment strategy that only utilizes existing information.


master budget

the comprehensive set of all budgetary schedules
and the pro forma financial statements of an organization


North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American Free trade Zone, with a resulting reduction in trade barriers


operating budget

a budget expressed in both units and dollars


participatory budget

a budget that has been developed
through a process of joint decision making by top management
and operating personnel


Planning, programming and budgeting system (PPBS)

A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.


Posttrade benchmarks

Prices after the decision to trade.


Pre-trade benchmarks

Prices occurring before or at the decision to trade.


Priority-based budget

A budget that allocates funds in line with strategies.


program budgeting

an approach to budgeting that relates
resource inputs to service outputs


Program trades

Also called basket trades, orders requiring the execution of trades in a large number of
different stocks at as near the same time as possible. Related: block trade


Publicly traded assets

Assets that can be traded in a public market, such as the stock market.


Registered trader

A member of the exchange who executes frequent trades for his or her own account.


Reversing trade

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


rolling budget

see continuous budgeting


Rolling budgets

A method of budgeting in which as each month passes, an additional budget month is added such that there is always a 12-month budget.


Spot trade

The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.


Structural Deficit

The budget deficit in excess of the deficit that in the long run keeps constant the ratio of the publically held national debt to GDP.


Terms of trade

The weighted average of a nation's export prices relative to its import prices.


Terms of Trade

The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.


Thinly traded

Infrequently traded.


Trade

A verbal (or electronic) transaction involving one party buying a security from another party. Once a
trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.


Trade acceptance

Written demand that has been accepted by an industrial company to pay a given sum at a future date.
Related: banker's acceptance.


Trade credit

Credit granted by a firm to another firm for the purchase of goods or services.


Trade date

In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on
which a trade occurs. trades generally settle (are paid for) 1-5 business days after a trade date. With stocks,
settlement is generally 3 business days after the trade.


Trade debt

Accounts payable.


Trade Deficit

deficit on the balance of merchandise trade.


Trade draft

A draft addressed to a commercial enterprise. See:draft.


Trade house

A firm which deals in actual commodities.


Trade Loading

A term used for channel stuffing in the domestic tobacco industry.


trade-off theory

Debt levels are chosen to balance interest tax shields against the costs of financial distress.


Trade on top of

trade at a narrow or no spread in basis points relative to some other bond yield, usually
Treasury bonds.


Traders

Persons who take positions in securities and their derivatives with the objective of making profits.
traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread.
traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional
movement of prices or spread positions.


Uptick trade

Related:Tick-test rules


World Trade Organization (WTO)

the arbiter of global trade that was created in 1995 under the General Agreement on Tariffs and trade; each signatory country has one
vote in trade disputes


zero-base budgeting

a comprehensive budgeting process
that systematically considers the priorities and alternatives
for current and proposed activities in relation to organization
objectives; it requires the rejustification of ongoing activities


Zero-based budgeting

A method of budgeting that ignores historical budgetary allocations and identifies the costs that are necessary to implement agreed strategies.



 

 

 

 

 

 

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