Glossary Games- Kidwell; Financial Markets, Institutions and Money

Davidson; Management - 3rd Australasian Edition

1.	The function of interest rates in the economy to allocate funds between SSUs and DSUs in the financial markets Answer:

2.	i = r + ΔPe, where i = the observed nominal rate of interest (the contract rate), r = the real rate of interest and ΔPe = the expected annual percentage change in the average price level in the economy (expected inflation) Answer:

3.	The rental price of money, usually expressed as an annual percentage of the nominal amount of money borrowed; the price of borrowing money for the use of its purchasing power Answer:

4.	The interest rates that are observed in the marketplace Answer:

5.	The preference of people to consume goods today rather than tomorrow Answer:

6.	The nominal rate of interest prevailing in the marketplace adjusted for the expected rate of inflation; the equilibrium rate of interest if no inflation occurs Answer:

7.	The nominal rate of return on an investment adjusted for the actual rate of inflation that occurred after the investment was undertaken. The realised real rate can be either negative or positive. Answer:

8.	The future additional real output generated by investment in productive capital projects Answer:

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