Glossary of Terms

See also A Glossary of Terms Used in the Federal Budget Process.

Key Terms
Term Definition
Bills Treasury bills are short-term securities that mature in 1 year or less from their issue date. Investors pay less than the bills’ par or face value, and when bills mature they receive the par or face value. For example, a $1,000 bill might sell at auction for $980. When the bill matures, the investor receives the face value, in this case $1,000. The difference ($20) equals the interest earned.
Bonds Treasury bonds are securities that pay a fixed rate of interest every 6 months until they mature, which is when they pay their par value. Bonds mature in more than 10 years from their issue date.
Consolidated Financial Statements The consolidated financial statements present consolidated and summarized financial information from the various federal government agencies and departments. They are part of the Financial Report of the United States Government, referred to as the Consolidated Financial Report (CFR). The goal of the CFR is to make available to every American a comprehensive overview of the federal government's finances.
Debt Held by Government Accounts (Intragovernmental Debt) Federal debt owed to government accounts, primarily to federal trust funds such as Social Security and Medicare. The cumulative surpluses, including interest earnings, of these trust funds and other government accounts have been invested in Treasury securities, almost always nonmarketable. Whenever a government account needs to spend more than it takes in from the public, the Treasury must provide cash to redeem debt held by the government account. Consequently, this reflects a future burden on the economy.
Debt Held by the Public Federal debt held by all investors outside of the federal government, including individuals, corporations, state or local governments, the Federal Reserve, and foreign governments.
Debt Limit A legal ceiling on the amount of gross federal debt (excluding some minor adjustments), which must be raised periodically to accommodate additional federal borrowing.
Deficit The amount by which the government's spending exceeds its revenues for a given period, usually a fiscal year.
Federal Reserve The central bank of the United States. It is responsible for the conduct of monetary policy.
Financial Intermediaries Firms that borrow from consumer/savers and lend to companies and households that need resources for investment and consumption.
Fiscal Gap This represents the difference, or gap, between revenue and spending in present value terms over a relatively long period, such as 75 years, that would need to be closed in order to achieve a specified debt level at the end of the period.
Fiscal Year Any yearly accounting period, regardless of its relationship to a calendar year. The fiscal year for the federal government begins on October 1 of each year and ends on September 30 of the following year; it is named by the calendar year in which it ends. Prior to fiscal year 1977, the federal government began its fiscal year on July 1 and ended it on June 30.
Government-Sponsored Enterprises (GSEs) The Federal Government has chartered these to provide financial intermediation for specified public purposes, such as mortgages. Examples include the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal Home Loan Banks, the Farm Credit System, and the Federal Agricultural Mortgage Corporation. Although federally chartered to serve public-policy purposes, the GSEs are classified as non-budgetary and excluded from the Budget. This is because they are intended to be privately owned and controlled, with any public benefits resulting from the GSEs’ business transactions accruing indirectly.
Gross Debt (Total Debt) The total amount of outstanding federal debt, whether issued by the Treasury or other agencies and held by the public or federal government accounts.
Gross Domestic Product (GDP) A commonly used measure of domestic national income. GDP is the value of all goods and services produced within the United States in a given year and is conceptually equivalent to incomes earned in production. It is a rough indicator of the economic earnings base from which the government draws its revenues.
Gross Interest Essentially represents interest on all Treasury debt securities, including interest on debt held by the public and interest credited to government trust funds and other government accounts that hold federal debt.
Inflation A rise in the general price level.
Interest Rates The cost of borrowing or the price paid for the rental of funds (usually expressed as a percentage).
Liability A probable future outflow or other sacrifice of resources as a result of past transactions or events. Generally, liabilities are thought of as amounts owed for items or services received, assets acquired, construction performed (regardless of whether invoices have been received), and amounts received but not yet earned.
Liquidity The ability for investors easily to trade a security because there are many people interested in buying and selling at any given time.
Marketable Treasury Securities The Treasury issues two major types of debt securities to the public: marketable and nonmarketable securities. Marketable securities, which consist of Treasury bills, notes, bonds, and TIPS, can be resold by whoever owns them. Marketable securities are auctioned at regular intervals during the year.
Monetary Policy The use of reserve requirements, discount rates, and purchases and sales of Treasury securities (open market operations) by the Federal Reserve (the nation's central bank) to affect the rate of growth of the nation's money supply. The goals of monetary policy are to promote maximum employment, stable prices, and moderate long-term interest rates.
National Saving National saving is the portion of the nation's income not used for consumption during a given period. Gross national saving includes the saving of all sectors—households, businesses, and government; net national saving is gross national saving less consumption of fixed capital (depreciation).
Net Interest Primarily interest on debt held by the public. In addition to interest on debt held by the public, the government also earns some interest from various sources and pays interest for purposes other than borrowing from the public. These amounts are only a small portion of net interest and, taken together, slightly reduce its total.
Nonmarketable Treasury Securities These are nontransferable securities issued by the government and registered to the owner. While the securities cannot be sold in the financial market, they can be redeemed at any time after they have been held for one year. Examples are U.S. Savings Bonds.
Notes Treasury notes are securities that pay a fixed rate of interest every 6 months until they mature, which is when they pay their par value. Treasury notes mature in more than 1 year, but not more than 10 years from their issue date.
Open Market Operations One of the ways the Federal Reserve conducts monetary policy is purchasing and selling publicly held Treasury securities, i.e., in the secondary market, to affect the rate of growth of the nation's money supply.
Reserve Currency An international currency used by non-residents as a medium of exchange, a unit of value, and a store of value. The U.S. dollar is presently considered to be the world’s dominant reserve currency.
Rollover Risk The risk that Treasury will have to refinance its debt at less favorable rates.
Trust Funds Federal budget accounts that are so designated by law. These accounts usually have a designated, or "earmarked," source of revenue. These revenues are authorized to be spent for the programs and activities supported by the trust funds. Examples are the Social Security and Medicare trust funds.
Secondary Market The marketplace in which marketable Treasury securities (which constitute most debt held by the public, and which can be sold by whoever owns it) are traded. For example, Treasury securities are resold by primary dealers, who purchase large amounts of Treasury securities.
Surplus The amount by which the government's revenues exceed outlays in a given period.
TIPS Treasury Inflation Protected Securities (TIPS) provide protection against inflation to investors who are willing to pay a premium for this protection in the form of a lower interest rate. The principal increases with inflation and decreases with deflation, but does not fall below par value. TIPS pay interest semiannually at a fixed rate. The rate is applied to the adjusted principal, so interest payments rise with inflation and fall with deflation. When it matures, an investor is paid the inflation adjusted principal or the original principal (whichever is greater), thereby also being protected against deflation.
Yield The rate of return an investor would earn if a security were held to maturity.