Google
Saturday 
September 24, 2022 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
CAPITAL ACCOUNT: One of two parts of a nation's balance of payments. The capital is a record of all purchases of physical and financial assets between a nation and the rest of the world in a given period, usually one year. On one side of the balance of payments ledger account are all of the foreign assets purchase by our domestic economy. On the other side of the ledger are all of our domestic assets purchased by foreign countries. The capital account is said to have a surplus if a nation's investments abroad are greater than foreign investments at home. In other words, if the good old U. S. of A. is buying up more assets in Mexico, Brazil, and Hungry, than Japanese, Germany, and Canada investors are buying up of good old U. S. assets, then we have a surplus. A deficit is the reverse.

Visit the GLOSS*arama


L:

A broad monetary measure that combines M3 plus several liquid assets, including commercial paper, U.S. Treasury bills, savings bonds, and bankers' acceptances. L used to be tracked and reported by the Federal Reserve System along with M1, M2, and M3. However, L is no longer reported.
L once represented the broadest measure of liquid assets reported by the Federal Reserve System. It contained everything in M3 (currency, checkable deposits, assorted savings deposits, and institutional near monies), plus four nonmoney liquid assets--commercial paper, U.S. Treasury bills, savings bonds, and bankers' acceptances.

These liquid assets provide a pool of wealth that can be converted to money (currency or checkable deposits) with relative ease and minimal loss of value. The assets are not quite as liquid as the savings near monies found in M2 nor the investment near monies found in M3. But they are substantially more liquid than other financial or physical assets (corporate stocks, factories, housing, or furniture).

While the numbers are not readily available, when officially tracked by the Federal Reserve, about 80 to 85 percent of L was comprised of M3, with the remaining 15 to 20 percent consisting of the extra liquid assets.

Liquid Assets

L was calculated, when it as officially tracked, as the sum of M3 and liquid assets. These liquid assets are financial assets that can be converted to currency or checkable deposits only minimal effort and minimal loss of value.

The four primary liquid assets added to M3 to calculate L are: (1) commercial paper, (2) U.S. Treasury bills, (3) savings bonds, and (4) bankers' acceptances.

  • Commercial Paper: These are unsecured, short-term promissory notes (usually less than nine months) issued by businesses to obtained working capital. Commercial paper is negotiable and, once issued, is commonly traded among investors through established markets until the maturity date. As such, commercial paper is relatively liquid. It can be easily sold to other investors, meaning it can be converted to currency or checkable deposits with little loss of value.

  • U.S. Treasury Bills: These are short-term promissory notes (usually less than a year) issued by the federal government to finance the federal deficit. Like commercial paper, Treasury bills are negotiable once issued and can be easily converted to currency or checkable deposits through established markets.

  • Savings Bonds: These are standard savings bonds issued by the federal government and typically purchased by members of the household sector. They are a notch down the liquidity ladder from other types of household savings, such as savings accounts and money market mutual funds. As such, they can be "cashed in" and converted to spendable M1, but not as easily as other savings.

  • Bankers' Acceptances: These are short-term promissory notes issued by nonfinancial firms (such as a manufacturing firm) that are backed or underwritten by a commercial bank. Like commercial paper, bankers' acceptances are used to obtain short-term working capital, often for firms engaged in importing and exporting. Also like commercial paper and Treasury bills, once issued, these assets are exchange through markets, making them relatively liquid.

Three Monetary Aggregates

While L is no longer reported by the Federal Reserve System, three other monetary aggregates continue to be tracked. They are conveniently labeled M1, M2, and M3.
  • Narrow-Range Money: M1: This is the combination of currency (and coins) issued by government and held by the nonbank public and checkable deposits issued by banking institutions. M1 contains the two items that function as THE medium of exchange for the U.S. economy.

  • Medium-Range Money: M2: This is M1 plus the addition of highly liquid, savings-type near monies. The near monies added to M1 to obtain M2 include savings deposits, certificates of deposit, money market deposits, and money market mutual funds. Some folks consider M2 a better overall measure of the economy's money supply than M1.

  • Board-Range Money: M3: This is M2 plus the addition of several slightly less liquid, investment-type near monies. The near monies added to M2 to obtain M3 include larger denomination certificates of deposit, larger money market deposits, repurchase agreements, and Eurodollars.

LABOR =>


Recommended Citation:

L, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2022. [Accessed: September 24, 2022].


Check Out These Related Terms...

     | monetary aggregates | M1 | M2 | M3 | savings deposits | money market deposits | money market mutual funds | certificate of deposit | currency | checkable deposits | near monies | plastic money | repurchase agreements | Eurodollars |


Or For A Little Background...

     | money | money functions | money characteristics | fiat money | commodity money | medium of exchange | liquidity | savings |


And For Further Study...

     | money creation | fractional-reserve banking | banking | Federal Reserve System | monetary economics | monetary base | monetary policy | debit card | monetary economics |


Related Websites (Will Open in New Window)...

     | Federal Reserve System | Federal Reserve Education | U.S. Department of the Treasury | The Currency Gallery |


Search Again?

Back to the WEB*pedia


APLS

BLACK DISMALAPOD
[What's This?]

Today, you are likely to spend a great deal of time strolling through a department store hoping to buy either 500 feet of coaxial cable or a coffee cup commemorating the 1960 Presidential election. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
Your Complete Scope

This isn't me! What am I?

Mark Twain said "I wonder how much it would take to buy soap buble if there was only one in the world."
"God gives talent; work transforms talent into genius. "

-- Anna Pavlova, ballerina

M2
M1 plus savings types of near monies, including savings deposits, certificates of deposits, money market deposits, repurchase agreements, and Eurodollars
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2022 AmosWEB*LLC
Send comments or questions to: WebMaster