What is a Tight Market? A tight market is defined as a market with high trading volume and narrow bid and ask margins. One characteristic of the tight market is abundant liquidity and high competition on both the buyers and sellers part. The term may also indicate a physical market where the demands are higher than supply thereby resulting in a high...

What is the House Money Effect? The house money describes a cognitive bias in which investors take higher risks when reinvesting than they would when investing their initial capital. This bias explains the tendency of investors to take on greater risks because they already earned profits from their investments, these risks would not have been taken ...

What is the Federal Open Market Committee (FOMC)? In the United States, the Federal Open Market Committee (FOMC) is an arm of the Federal Reserve Board that controls monetary policy. The Federal Reserve System is responsible for overseeing and regulating the open market operations in which monetary policy is key. Money policy or fiscal policy is a c...

What are the Keynesian Assumptions in the Aggregate Demand and Aggregate Supply Model? The AD/AS diagram illustrates two Keynesian assumptions—the importance of aggregate demand in causing recession and the stickiness of wages and prices. Note that because of the stickiness of wages and prices, the aggregate supply curve is flatter than either suppl...

What is a Combination Loan? A combination loan comprises two different mortgage loans from the same lender, to the same borrower. A combination loan type provides funding for building a new home, alongside a conventional mortgage upon successful completion. Another combination loan type provides two simultaneous loans for buying an existing home. It...

What is an Economic Bubble? A bubble as an economic season with a very fast increase in the asset prices with subsequent shrinkage of the economy. Bubble creation occurs when there is inrush in the asset prices unwarranted by the asset's primary principle and facilitated by free-market behavior. An overwhelming sell-off occurs when investors are not...

What is Government Market Regulation? Government regulation is a form of control exercised by Governments over private markets. Governments generally seek to regulate private markets through a combination of statutes, court interpretations, and administrative agency regulations. The objective of these regulations is to increase confidence in the mar...

What is a Situation Analysis? Situation analysis is examines the strategies employed by a company to respond to the internal and external environment. It allows the strategist to understand the association's capacities, clients, and business condition. Common techniques include the The 5Cs Analysis, 4C Analysis, 7C Analysis, SWOT analysis, and Porte...

What is a Macaroni Defense? A Macaroni Defense is a defensive tactic used by a company against a hostile takeover bid. During a Macaroni Defense maneuver, a corporation that is a potential takeover target, issues a large number of bonds with an exceptionally high discount on the redemption value. This essentially means that in the event of a takeove...

What is the Debt-to-Income Ratio (DTI)? Debt-to-Income Ratio (DTI) is calculated by dividing one individuals or company's debt payments by his or her or its total income over a specified period, expressed as a percentage. How is Debt-to-Income Ratio Used? The DTI ratio concerns person or company's ability to repay its debt. The creditor, such as a m...