Glossary theory of asset demand The theory that the quantity demanded of an asset is (1) usually positively related to wealth, (2) positively related to its expected return relative to alternative assets, (3) negatively related to the risk of its return relative to alternative assets, and (4) positively related to its liquidity relative to alternative assets 84 theory of efficient capital markets See efficient market hypothesis theory of purchasing power parity (PPP) The theory that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries 499 total cash reserves See reserves trade balance The difference between merchandise exports and imports 522 transaction costs The time and money spent trying to exchange financial assets, goods, or services 31 transmission mechanisms of monetary policy The channels through which the money supply affects economic activity 639 trustee The representative of a person or corporation 275 underfunded Describing a pension plan in which the contributions and their earnings are not sufficient to pay out the defined benefits when they come due 296 underwriters Investment banks that guarantee prices on securities to corporations and then sell the securities to the public 301 underwriting Guaranteeing prices on securities to corporations and then selling the securities to the public 20 unemployment rate The percentage of the labour force not working unexploited profit opportunity A situation in which an investor can earn a higher than normal return 153 unit of account Anything used to measure value in an economy 45 725 unsecured debt Debt not guaranteed by collateral 169 unsterilized foreign exchange intervention A foreign exchange intervention in which a central bank allows the purchase or sale of domestic currency to affect the monetary base 520 vault cash Currency that is physically held by banks and stored in vaults overnight 317 velocity of money The rate of turnover of money; the average number of times per year that a dollar is spent in buying the total amount of final goods and services produced in the economy 552 venture capital firm A financial intermediary that pools the resources of its partners and uses the funds to help entrepreneurs start up new businesses 179 venture capital fund A financial intermediary that pools the resources of its partners and uses the funds to help entrepreneurs start up new businesses 307 virtual bank A bank that has no building but rather exists only in cyberspace 261 wealth All resources owned by an individual, including all assets 44, 83 World Bank The International Bank for Reconstruction and Redevelopment, an international organization that provides long-term loans to assist developing countries in building dams, roads, and other physical capital that would contribute to their economic development 525 World Trade Organization (WTO) An organization headquartered in Geneva, Switzerland, that monitors rules for the conduct of trade between countries (tariffs and quotas) 525 yield curve A plot of the interest rates for particular types of bonds with different terms to maturity 119 yield to maturity The interest rate that equates the present value of payments received from a credit market instrument with its value today 63 zero-coupon bond See discount bond