Glossary of Economic Terms: R
GDP(gross domestic product) adjusted for inflation. Real GDP provides the value of GDP in constant dollars, which is used as an indicator of the volume of the nation’s output.
real interest rates
Interest rates adjusted for the expected erosion of purchasing power resulting from inflation. Technically defined as nominal interest rates minus the expected rate of inflation.
A significant decline in general economic activity extending over a period of time.
The time it takes for policymakers to recognize the state of the economy. See also time lag, implementation lag, and impact lag.
Regional Check Processing Center – RCPC
A Federal Reserve check processing operation that clears checks drawn on depository institutions located within a specified area. RCPCs expedite collection and settlement of checks within the area on an overnight basis.
A type of variable loan rate involving a renewable short-term ‘balloon’ note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary. Also see balloon payment.
An agreement by which, for example, the Federal Reserve purchases a security for immediate delivery and receives interest at a specific rate from a government securities dealer, with an agreement to sell the security back at the same price by a specific date (usually within 15 days). This arrangement allows the Federal Reserve to inject reserves into the banking system on a temporary basis to meet a temporary need and to withdraw these reserves as soon as that need has passed.
Funds that a depository institution is required to maintain as vault cash or on deposit with a Federal Reserve Bank; required amount varies according to required reserve ratios set by the Board of Governors and the volume of reservable liabilities held by the institution.
required clearing balance
Amount kept by a depository institution in an account at a Federal Reserve Bank, in addition to its required reserve balance, to ensure that it can meet its daily transaction obligations without overdrawing its required reserve account and thereby incurring a penalty. Required clearing balances earn credits that can be used to pay for services provided by the Federal Reserve.
required reserve balance
Portion of its required reserves that a depository institution must hold in an account at a Federal Reserve Bank.
A depository institution’s vault cash (up to the level of its required reserves) plus balances in its reserve account (not including funds applied to its required clearing balance).
See open-end credit.