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Corporate Basics

What is Deflation?

Deflation is an economic term used to describe a trend of broad-based price declines for goods and services

What is Demand?

Demand is a measure of consumer’s desire to purchase goods and services. Demand is a key metric in reading price trends

What is the Discount Rate?

The Discount Rate is the minimum interest rate the Federal Reserve will charge for lending to commercial banks

What is Economies of Scale?

Economies of Scale is a concept that the efficiency of production rises as the quantity of goods produced increases

What is the Federal Funds Rate?

The federal funds rate is the overnight rate at which commercial lenders lend excess reserves to other institutions

What is the Federal Open Market Committee?

The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System

What is Fiscal Policy?

Fiscal policy is related to monetary policy, in that they are both aimed to either boost an economy or temper growth

What is Inflation?

Inflation is the increase in the cost of goods and the decrease in the buying power of a denomination of currency

What is Hyperinflation?

Hyperinflation is when a rate of inflation grows exponentially, and a currency is rapidly devalued
What is the Interbank Rate?

What is the Interbank Rate?

The interbank rate is the average lending rate used between banks of similar size when they borrow money from each other

What is a Rate Swap?

A rate swap is an over-the-counter contract between two institutions to trade the cash flows on two principal amounts

What is an Inverted Yield Curve?

An inverted yield curve occurs when long-term treasuries have a lower yield than short-term treasuries

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) is a measure of the average change, over time, in the prices paid by urban consumers

How is the Consumer Price Index (CPI) Calculated?

The Consumer Price Index (CPI) is calculated using prices of sample goods from predetermined urban areas
What is Freddie Mac?

What is Freddie Mac?

Freddie Mac is a government-sponsored company which purchases mortgages from banks and securitizes them for sale

What is GAAP?

GAAP are the accounting principles which must be followed by publicly traded corporations and are widely used elsewhere

What is Ginnie Mae?

Ginnie Mae brokers mortgage-backed securities which are backed by the full faith and credit of the US Government

What is the Glass-Steagall Act?

The Glass-Steagall Act was passed in 1933 to place a dividing wall between commercial banking and investment banking

What is a Global Depository Receipt (GDR)?

A Global Depository Receipt is a security which represents ownership in shares of a foreign corporation

What is GDP?

Gross Domestic Product (GDP) measures the production of all industries within a country, to overview the national economy

What is the Income of the Average American?

The median household income in the United States is $52,029. In California, the average was at $61,017

What is Future Value?

Future Value is the hypothetical value of an investment at a specific date in the future

What is the Gearing Ratio?

In finance, a gearing ratio is a term referring the amount leverage being used, compared to the amount of equity

What is Intrinsic Value?

Intrinsic Value is the value of a security which is “built into it.” Both options and stocks have it, but it is different

What is the Law of Demand?

The Law of Demand states that as prices increase, demand will decrease, and vice versa. That is to say, inversely related

What is Diminishing Marginal Utility?

Diminishing marginal utility is the decrease in the usefulness or demand for something as more and more of it is produced

What is the Law of Supply?

If the price of a good increases, the supply of that good will increase, and this is known as the Law of Supply

What is Cost of Capital?

The Cost of Capital is the hurdle over which a business must get to generate positive cash flow

What is CAGR?

Compound Annual Growth Rate is the rate which an investor would have to get to go from a present value to a future value

What is Monetary Policy?

Monetary policy is the stance of the central bank at any given time regarding the tightening or loosening of rates

What is a Monopoly?

A monopoly is an unhealthy situation in the market in which a single company is the only option in a specific sector

What is Nominal GDP?

Nominal GDP is the value of all good and services produced in a country, without adjustments for inflation
What is Stagflation?

What is Stagflation?

Stagflation is the occurrence of both stagnation, which is slowing growth and production levels, and inflation

What is the Unemployment Rate?

The unemployment rate is normally interpreted as a percentage of the working-age population that does not have a job

What is Accommodative Monetary Policy?

Accommodative monetary policy is when a central bank makes it easier for banks and consumers to borrow money