Chapter 5 - The Financial Sector

national savings

A dollar borrowed from ________ is returned to a domestic borrower with interest.

financial system

A well- functioning ________ helps people reduce their exposure to risks.

Loan

________- backed securities are traded on financial markets in a similar manner to bonds.

Transaction costs

________, financial risk, and the desire for liquidity are the three major issues that borrowers and lenders face.

financial risk

The term* ________* refers to the uncertainty about future outcomes that incorporate financial gains and losses.

financial market efficiency

This improves ________ by increasing the likelihood of mutually advantageous transactions between lenders and borrowers- trades that enrich society.

business owner

A(n) ________ can reduce the risk of loss by diversifying assets, investing in a variety of assets with unrelated (or independent) hazards.

money market

The ________ is in equilibrium at the interest rate rE: the quantity of money demanded by the public is equal to M, which is the quantity of money supplied.

Transaction costs

________, financial risk, and the demand for liquidity are the three major issues confronting borrowers and lenders.

Financial risk

________, or uncertainty about future events that entail financial losses or profits, is an issue that real- world borrowers and lenders encounter.