Category: Definitions

Federal Funds Rate

Federal Funds Rate is the rate at which depositary institutions (Banks, Credit Unions etc) lend any excess reserve kept with the federal reserve to another depository institution. Reserve money is the portion of deposits which depositary institutions must keep in the form of cash with the Federal Reserve. Hence, depository institutions which have excess reserves more »

Run(finance and banking)

A run is when multiple depositors start withdrawing their money from a financial institution (banks, trusts, brokerages etc.) at the same time, which in turn would threaten the financial stability of these institutions.   Share

Margin(finance)

Margin is borrowing money (from your broker, a bank or financial institution) to buy a stock and using the investment as collateral. Share

Short Selling

A short sale is a maneuver in which the seller, expecting prices to fall, offers for sale stock he/she does not yet own, which would be delivered to the buyer at a future date. Thus, taking profits from the difference between current (high) prices they would get as payment for the stock and the future more »

Types of Taxation

There are 2 main types of taxation: 1)Direct Tax: This is payable to the government directly from the income of an individual or firm. e.g. the income tax paid 2)Indirect tax:This is not directly taken from a individuals/firms income, this is paid as and when the individual/firm spends money. e.g. Goods and Services Tax Share

Deficit

A government runs three types of deficits: 1)Revenue deficit: A revenue deficit is when the revenue expenditures(e.g. :Salaries) of a government exceed revenue receipts(e.g.:Tax revenue). 2)Primary deficit: A government runs a primary deficit when it expenditures excluding interest paid on debt servicing are greater than the total revenue it earns(Revenue receipts and Capital receipts). 3)Fiscal more »

Alternative Minimum Tax

An alternative minimum tax is a type of income tax which runs parallel to the conventional income tax. Alternative minimum tax(AMT) is generally a flat tax rate which is calculated on income after removing certain exemption. The AMT is designed to ensure that individuals pay at least a certain percentage of their income as taxes. more »

Capital Gains Tax

A profit from the sale of an asset or investment is know as capital gains. Example: If a house bought at $100,000 is sold for $150,000, the profit of $50,000 is know as capital gains. A tax on these gains is know as Capital Gains Tax. Share

Debt Celling

In the United States, the government has a limit on how much it can borrow to finance deficits. This is know as the Debt Celling. This limit can only be changed by legislative action taken by the US Congress. Share

Competitive Devaluation of Currencies

When multiple countries deliberately devalue their currencies so as to make their currency the weakest relative to other currencies, it is know as competitive devaluation of currencies. Countries would do this to make their exports more competitive, since a weaker currency increases earnings from exports.   Share

Credit

Credit is a financial facility that enables a person or business to borrow money to purchase products or assets immediately and pay for them over an extended time period. Credit facilities come in a variety of forms, including bank loans, overdraft facilities and trade credit. Share

The Invisible Hand

The Invisible hand is the unobservable market force that helps the demand and supply of goods in a free market reach an equilibrium automatically. The term was coined by Adam Smith. Share

Dollar Index

The dollar index measures the relative performance of the dollar against a basket of currencies of other countries. These countries are the major trade partners of the US. Weights of different currencies in the dollar index Euro:                     57.6% Japanese Yen:    13.6% British Pound:   more »