GLOSSARY OF ECONOMIC TERMS (ALPHABET WISE: LETTER-C).
CALIFORNIA ECONOMIC DEVELOPMENT LENDING INITIATIVE (CEDLI): This is a statewide community development corporation that provides financing to serve a range of community economics development needs, including small businesses, non-profit lenders & community real estate projects.
CAPACITY UTILIZATION RATE: The % of the economy’s total plant & equipment that is currently in production. Usually a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.
CAPITAL MARKET: The market in which corporate equity & longer-term debt securities (those maturing in more than one year) are issued & traded.
CAPITAL MARKET RATES: See long-term interest rates.
CASH MANAGEMENT BILLS (CMB): Very short maturity bills that the Treasury sells on an irregular basis to bridge low points in the Treasury’s cash balance.
CASH METHOD OF ACCOUNTING: A system, used especially in computing income tax, in which income is not credited until it is actually or constructively received & expenses are not charged until they have been paid; to be distinguished from the accrual method, in which income is credited when the legal right to the income occurs & expenses are charged when the legal liability becomes enforceable.
CEASE-&-DESIST ORDER: An order issued after notice & opportunity for hearing, requiring a depository institution, a holding company, or a depository institution official to terminate unlawful, unsafe, or unsound banking practices. Cease-&-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act & can be enforced directly by the courts.
CENTRAL BANK: The principal monetary authority of a nation, a central bank performs several key functions, including issuing currency & regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States.
CENTRAL BANK INTERVENTION: The buying or selling of currency, foreign or domestic, by central banks, in order to influence market conditions or exchange rate movements.
CERTIFICATE OF DEPOSIT (CD): A form of time deposit at a bank or savings institution which cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity.
CHECK CLEARING: The movement of checks from the banks or other depository institutions where they are deposited back to those on which they are written & funds movement in the opposite direction. This process results in credits to accounts at the institutions of deposit & corresponding debits to accounts at the paying institutions. The Federal Reserve participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangement.
CLEARING HOUSE: An institution where mutual claims are settled between accounts of member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes, but more recently have cleared other types of settlements, including electronic fund transfers.
CLEARINGHOUSE INTERBANK PAYMENTS SYSTEM (CHIPS): An automated clearing system used primarily for international payments. This system is owned & operated by the New York Clearinghouse banks & engages Fedwire for settlement.
CLOSED-END CREDIT: An agreement in which advanced credit, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate & automobile loans are closed-end agreements.
COLLATERAL: Property that is offered to secure a loan or other credit & that becomes subject to seizure on default (Also called security).
COMMERCIAL BANK: Bank that offers a broad range of deposit accounts, including checking, savings & time deposits & extends loans to individuals & businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities.
COMMODITY PRICES: An index of commodities (such as oil & steel) traded in worldwide markets.
COMMUNITY REINVESTMENT ACT (CRA): Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing & other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe & sound operations.
COMMUNITY REINVESTMENT ACT STATEMENT: A description available for public inspection at each bank office indicating, on a map, the communities served by that office & the types of credit the bank is prepared to extend within the communities served.
COMPETITIVE BIDDERS: One of two categories of bidders on Treasury securities: competitive & noncompetitive. Competitive bidders are usually financial institutions.
COMPTROLLER OF THE CURRENCY: See Office of the Comptroller of the Currency.
CONSORTIUM: A grouping of corporations to fulfill a combined objective or project that usually requires interbusiness cooperation & sharing of the goods.
CONSUMER ADVISORY COUNCIL (CAC): A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer & creditor interests, advises the Federal Reserve Board on the exercise of its responsibilities under the Consumer Credit Protection Act & on other matters on which the Federal Reserve Board seeks its advice.
CONSUMER PRICE INDEX (CPI): A measurement of the cost of living determined by the Bureau of Labor Statistics.
CONTRACTIONARY FISCAL POLICY: A policy to decrease governmental spending and/or an increase in taxes.
CONTRACTIONARY MONETARY POLICY: A policy to restrict the growth of money & credit in the economy.
CONTEMPORANEOUS RESERVE ACCOUNTING: An accounting method that allows member banks of the Federal Reserve a one-day lag when calculating their required reserves & reserves held as vault cash. Except for the one-day lag, Assets & Liabilities used in calculating reserves & required reserves are those of the same week.
CORRESPONDENT BANK: A bank that accepts deposits of & performs banking services for other depository institutions.
COSIGNER: A term referring to a person, other than the principle borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.
CREDIT: The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
CREDIT CARD: Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods & services on credit.
CREDIT SCORING SYSTEM: A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to credit worthiness.
CREDIT UNION: Financial cooperative organization of individuals who have a common bond, such as a place of employment, residence, or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings & use their funds mainly to provide consumer installment loans to members.
CREDIT HISTORY: A record of how a person has borrowed & repaid debt.
CREDIT WORTHINESS: A creditor’s measure of a consumer’s past & future ability & willingness to repay debts.
CURRENCY APPRECIATION: An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates, a unit of one currency buys more units of another currency.
CURRENCY DEPRECIATION: A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency.
CURRENCY DEVALUATION: A deliberate downward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.
CURRENCY REVALUATION: A deliberate upward adjustment in the official exchange rate established, or pegged, by a Govt against a specified standard, such as another currency or gold.
CURRENCY UNION: A group of countries that agree to peg their exchange rates & to coordinate their monetary policies so as to avoid the need for currency reallignments.
CURRENT ACCOUNT BALANCE: The difference between the nation’s total exports of goods, services, and transfers & its total imports of them. Current account balance calculations exclude transactions in financial Assets & Liabilities.
CYCLICAL UNEMPLOYMENT: Unemployment caused by a low level of aggregate demand associated with recession in the business cycle..
CALIFORNIA ECONOMIC DEVELOPMENT LENDING INITIATIVE (CEDLI): This is a statewide community development corporation that provides financing to serve a range of community economics development needs, including small businesses, non-profit lenders & community real estate projects.
CAPACITY UTILIZATION RATE: The % of the economy’s total plant & equipment that is currently in production. Usually a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.
CAPITAL MARKET: The market in which corporate equity & longer-term debt securities (those maturing in more than one year) are issued & traded.
CAPITAL MARKET RATES: See long-term interest rates.
CASH MANAGEMENT BILLS (CMB): Very short maturity bills that the Treasury sells on an irregular basis to bridge low points in the Treasury’s cash balance.
CASH METHOD OF ACCOUNTING: A system, used especially in computing income tax, in which income is not credited until it is actually or constructively received & expenses are not charged until they have been paid; to be distinguished from the accrual method, in which income is credited when the legal right to the income occurs & expenses are charged when the legal liability becomes enforceable.
CEASE-&-DESIST ORDER: An order issued after notice & opportunity for hearing, requiring a depository institution, a holding company, or a depository institution official to terminate unlawful, unsafe, or unsound banking practices. Cease-&-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act & can be enforced directly by the courts.
CENTRAL BANK: The principal monetary authority of a nation, a central bank performs several key functions, including issuing currency & regulating the supply of credit in the economy. The Federal Reserve is the central bank of the United States.
CENTRAL BANK INTERVENTION: The buying or selling of currency, foreign or domestic, by central banks, in order to influence market conditions or exchange rate movements.
CERTIFICATE OF DEPOSIT (CD): A form of time deposit at a bank or savings institution which cannot be withdrawn before a specified maturity date without being subject to an interest penalty for early withdrawal. Small-denomination CDs are often purchased by individuals. Large CDs of $100,000 or more are often in negotiable form, meaning they can be sold or transferred among holders before maturity.
CHECK CLEARING: The movement of checks from the banks or other depository institutions where they are deposited back to those on which they are written & funds movement in the opposite direction. This process results in credits to accounts at the institutions of deposit & corresponding debits to accounts at the paying institutions. The Federal Reserve participates in check clearing through its nationwide facilities, though many checks are cleared by private sector arrangement.
CLEARING HOUSE: An institution where mutual claims are settled between accounts of member depository institutions. Clearinghouses among banks have traditionally been organized for check-clearing purposes, but more recently have cleared other types of settlements, including electronic fund transfers.
CLEARINGHOUSE INTERBANK PAYMENTS SYSTEM (CHIPS): An automated clearing system used primarily for international payments. This system is owned & operated by the New York Clearinghouse banks & engages Fedwire for settlement.
CLOSED-END CREDIT: An agreement in which advanced credit, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate & automobile loans are closed-end agreements.
COLLATERAL: Property that is offered to secure a loan or other credit & that becomes subject to seizure on default (Also called security).
COMMERCIAL BANK: Bank that offers a broad range of deposit accounts, including checking, savings & time deposits & extends loans to individuals & businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or municipal securities.
COMMODITY PRICES: An index of commodities (such as oil & steel) traded in worldwide markets.
COMMUNITY REINVESTMENT ACT (CRA): Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing & other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe & sound operations.
COMMUNITY REINVESTMENT ACT STATEMENT: A description available for public inspection at each bank office indicating, on a map, the communities served by that office & the types of credit the bank is prepared to extend within the communities served.
COMPETITIVE BIDDERS: One of two categories of bidders on Treasury securities: competitive & noncompetitive. Competitive bidders are usually financial institutions.
COMPTROLLER OF THE CURRENCY: See Office of the Comptroller of the Currency.
CONSORTIUM: A grouping of corporations to fulfill a combined objective or project that usually requires interbusiness cooperation & sharing of the goods.
CONSUMER ADVISORY COUNCIL (CAC): A statutory body established by Congress in 1976. The Council, with 30 members who represent a broad range of consumer & creditor interests, advises the Federal Reserve Board on the exercise of its responsibilities under the Consumer Credit Protection Act & on other matters on which the Federal Reserve Board seeks its advice.
CONSUMER PRICE INDEX (CPI): A measurement of the cost of living determined by the Bureau of Labor Statistics.
CONTRACTIONARY FISCAL POLICY: A policy to decrease governmental spending and/or an increase in taxes.
CONTRACTIONARY MONETARY POLICY: A policy to restrict the growth of money & credit in the economy.
CONTEMPORANEOUS RESERVE ACCOUNTING: An accounting method that allows member banks of the Federal Reserve a one-day lag when calculating their required reserves & reserves held as vault cash. Except for the one-day lag, Assets & Liabilities used in calculating reserves & required reserves are those of the same week.
CORRESPONDENT BANK: A bank that accepts deposits of & performs banking services for other depository institutions.
COSIGNER: A term referring to a person, other than the principle borrower, who signs for a loan. The cosigner(s) assumes equal liability for the loan.
CREDIT: The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
CREDIT CARD: Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods & services on credit.
CREDIT SCORING SYSTEM: A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to credit worthiness.
CREDIT UNION: Financial cooperative organization of individuals who have a common bond, such as a place of employment, residence, or membership in a labor union. Credit unions accept deposits from members, pay interest (in the form of dividends) on the deposits out of earnings & use their funds mainly to provide consumer installment loans to members.
CREDIT HISTORY: A record of how a person has borrowed & repaid debt.
CREDIT WORTHINESS: A creditor’s measure of a consumer’s past & future ability & willingness to repay debts.
CURRENCY APPRECIATION: An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates, a unit of one currency buys more units of another currency.
CURRENCY DEPRECIATION: A decline in the value of one currency relative to another currency. Depreciation occurs when, because of a change in exchange rates, a unit of one currency buys fewer units of another currency.
CURRENCY DEVALUATION: A deliberate downward adjustment in the official exchange rate established, or pegged, by a government against a specified standard, such as another currency or gold.
CURRENCY REVALUATION: A deliberate upward adjustment in the official exchange rate established, or pegged, by a Govt against a specified standard, such as another currency or gold.
CURRENCY UNION: A group of countries that agree to peg their exchange rates & to coordinate their monetary policies so as to avoid the need for currency reallignments.
CURRENT ACCOUNT BALANCE: The difference between the nation’s total exports of goods, services, and transfers & its total imports of them. Current account balance calculations exclude transactions in financial Assets & Liabilities.
CYCLICAL UNEMPLOYMENT: Unemployment caused by a low level of aggregate demand associated with recession in the business cycle..
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