credit

Examples of credit in the following topics:

• Problems of Long-Run Government Debt

  • A credit rating is an evaluation of the creditworthiness of a government, but not individual consumers.
  • The evaluation is made by a credit rating agency of the country's ability to pay back the debt and the likelihood of default.
  • A sovereign credit rating is the credit rating of a sovereign entity (i.e., a national government).
  • The sovereign credit rating indicates the risk level of the investing environment of a country and is used by investors looking to invest abroad.
  • If a country has a bad credit rating, it generally must have a higher interest rate on the debt it issues.

• The Federal Reserve and the Financial Crisis of 2008

  • The Fed responded to the financial crisis with conventional open market operations and unconventional credit facilities and bailouts.
  • To deal with the shrinking credit markets, the Fed created a selection of new credit facilities.
  • The Primary Dealer Credit Facility (PDCF) allows the banks that normally handle open market operations on behalf of the Fed to apply for overnight loans.
  • These new credit facilities were created based on the hope that increasing liquidity in the market would induce firms and consumers to borrow and spend.
  • The Fed provided credit to these institutions in an attempt to mitigate the effect of falling asset prices and stem the crisis.

• What's Next?

  • It developed a system of air-pollution credits, for example, which allowed companies to sell the credits among themselves.
  • Companies able to meet pollution requirements least expensively could sell credits to other companies.

• Institutions, Markets, and Intermediaries

  • Other financial intermediaries include: credit unions, private equity, venture capital funds, leasing companies, insurance and pension funds, and micro-credit providers.

• Money in the U.S. Economy

  • The Federal Reserve has three main tools for maintaining control over the supply of money and credit in the economy.
  • These tools allow the Federal Reserve to expand or contract the amount of money and credit in the U.S. economy.
  • If the money supply rises, credit is said to be loose.
  • When the money supply contracts, on the other hand, credit is tight.

• Introducing Aggregate Demand

  • Many societies have increasingly adopted debt and credit as an integral part of their economic system.
  • This has justified the incorporation of debt (also called the credit impulse) into the larger framework of aggregate demand.

• Measuring the Money Supply: M1

  • The bank sets 10% of the amount aside for required reserves, while the remaining $810 can be lent out by the bank as credit.
  • Meanwhile, the bank lends Mandy the $810 credit that it has created.

• Logic

  • Aristotle (384-322BCE) is usually credited with formalizing syllogistic or deductive reasoning.
  • Francis Bacon (1561-1626) is credited with formalizing inductive reasoning.

• Monetary Policy and Fiscal Stabilization

  • As a result of the Great Depression in the 1930s, Congress gave the Fed authority to vary reserve requirements and to regulate stock market margins (the amount of cash people must put down when buying stock on credit).
  • During much of the 1970s, the Fed allowed rapid credit expansion in keeping with the government's desire to combat unemployment.

• Early Farm Policy

  • These groups targeted railroads, merchants, and banks -- railroads for high shipping rates, merchants for what farmers considered unscrupulous profits taken as "middlemen," and banks for tight credit practices.
  • City dwellers and eastern business interests viewed the farmers' demands with distrust, fearing that calls for cheap money and easy credit would lead to ruinous inflation.