10 Points: (x2)
-http://quizlet.com/76175655/economics-unit-4-flash-cards/
-Unit 4 Vocabulary
Chapter 10
Money
anything that serves as a medium of exchange, a unit of account, and a store of value
Example: Cash
Medium of exchange
anything that is used to determine value during the exchange of goods and services
Example: Credit cards
Barter
The direct exchange of one set of goods or services for another
Example: Traditional trades like trading gold for a boat
Unit of account
A means for comparing the values of goods and services
Example: Money
Store of value
Something that keeps its value if it is stored rather than used
Example: keeping money in a bank
Currency
Coins and paper bills used as money
Example: the dollar bill
Commodity money
Objects that have value in themselves and that are also used as money
Example: salt
Representative money
Objects that have value because the holder can exchange them for something else of value
Example: IOU
Fiat money
Money that has value because the government has ordered that it is an acceptable means to pay debts
Example: United States money today
Gold standard
a monetary system in which paper money and coins are equal to the value of a certain amount of goods
Example: the US after the 1870s
6 characteristics of money
Durability, portability, divisibility, uniformity, limited supply, and acceptability
Banks
An institution for receiving, keeping, and lending money
Example: TCF Bank
National bank
A bank chartered, or licensed, by the national government
Example: the Bank of the United States
Bank run
Widespread panic in which great numbers of people try to redeem their paper money
Example: 1837
Greenbacks
Paper currency issued during the Civil War
Federal Reserve System
The nation's central banking system
Central bank
Bank that can lend to other banks in times of need
Example: Federal reserve banks
Member bank
Bank that belongs to the Federal Reserve System
Federal reserve note
The national currency we use today in the United States
Example: Dollar bill
Great depression
The severe economic decline that began in 1929 and lasted for more than a decade
Federal deposit insurance corporation
The government agency that insures customer deposits if a bank fails
Money supply
All the money available in the United States economy
Liquidity
The ability to be used as, or directly converted to, cash
Example: currency
Demand deposit
The money in checking accounts
Money market mutual fund
A fund that pools money from small savers to purchase short-term government and corporate securities
Example: savings deposits
Fractional reserve banking
A banking system that keeps only a fraction of funds on hand and lends out the remainder
Example: families paying for college tuition
Default
Failure to pay back a loan
Example: the bank loses money
Mortgage
A specific type of loan that is used to buy real estate
Example: a down payment on a house then paying over a period of time
Credit card
A card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services
Interest-simple vs. compound
Simple: paid only on principle
Compound: interest paid both on principle and accumulated interest
Principal
The amount of money borrowed
Example: paying someone $5
Debit card
A card used to withdraw money
Example: TCF debit card
Creditor
Person or institution to whom money is owed
Example: Visa
Types of financial institutions
Commercial banks, savings and loan associations, savings banks, credit unions, finance companies
Should the government increase regulation of financial markets? (pg 268-269)
Government should increase regulation of financial markets only by a very limited amount to prevent fraud and unrealistic expectations from consumers.
Chapter 11
Investment
The act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
Example: stocks
Financial system
The system that allows the transfer of money between savers and borrowers
Example: banks
Financial asset
Claim on the property or income of a borrower
Example: loans
Financial intermediary
Institution that helps channel funds from savers to borrowers
Example: banks
Mutual fund
Fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
Example: stock portfolios
Diversification
Spreading out investments to reduce risk
Example: investing in many different types of companies in the stock market rather than just one
Portfolio
A collection of financial assets
Prospectus
An investment that reports to potential investors
Example: intermediaries report
Return
The money an investor receives above and beyond the sum of money initially invested
Example: profits made in the stock market
Risk
How stable and investment is
Example: CDs aren't a risk
Bonds
Basically loans, or IOUs, that represent debt that the government or a corporation must repay to an investor.
Example: savings bonds
Coupon rate
The interest rate that a bond issuer will pay to a bondholder
Example: 50%
Maturity
The time at which payment to a bondholder is due
Example: Bond bought in 2010 has maturity in 2020
Par value
The amount that an investor pays to purchase a bond and that will be repaid to an investor at maturity
Example: a $25 bond that pays you $50
Yield
The annual rate of return on a bond if the bond were held to maturity
Example: 5%
Savings bond
Low-denomination bond issued by the United States government
Example: A savings bond for $50
Municipal bond
A bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks, and schools
Example: A bond issued by Minnesota
Corporate bond
A bond that a corporation issues to raise money to expand its business
Example: A bond issued by Apple
Securities and exchange commission
An independent agency of the government that regulates financial markets and investment companies
Example: the SEC
Junk bond
A lower-rated, potentially higher-paying bond
Example: bonds popular in the 1980s and 1990s
Capital market
Market in which money is lent for periods longer than a year
Example: long-term CDs
Money market
Market in which money is lent for periods of less than a year
Example: short-term CDs
Primary market
Market for selling financial assets that can only be redeemed by the original holder
Example: savings bonds
Secondary market
Market for reselling financial assets
Example: stock market
Buying bonds at a discount
Buying a bond for less than its par value
Bond ratings
How an investor decides which bonds to buy
Treasury bonds, Treasury bills, Treasury notes
Offer different lengths of maturity
Share
Portion of stock
Example: 200 shares of Apple
Equities
Claims of ownership in a corporation
Example: stocks
Capital gain
The difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller
Example: Selling stock for more than you bought it for
Capital loss
The difference between a lower selling price and a higher purchase price resulting in a financial loss to the seller
Example: Selling stock for less than you bought it for
Stock split
The division of a single share of stock into more than one share
Example: owners of a common stock
Stockbroker
A person who links buyers and sellers of stock
Example: you hire them to help you choose what to invest in
Brokerage firm
A business that specializes in trading stocks
Example: a place where lots of stockbrokers work
Stock exchange
A market for buying and selling stock
Example: the New York Stock Exchange
Nasdaq
American market for OTC securities
Example: Amazon is part of Nasdaq
OTC market
An electronic marketplace for stocks and bonds
Example: buying directly from a dealer or broker
Futures
Contracts to buy or sell at a specific date in the future at a price specified today
Example: a buyer and seller might agree today on a price of $4.50 for a bushel of soybeans sic or nine months in the future
Options
Contracts that give investors the choice to buy or sell stock and other financial assets
Example: buying a specific stock at a specific price
Call option
The option to buy shares of stock at a specified time in the future
Example: pay $10 today for a call option
Put option
The option to sell shares of stock at a specific time in the future
Example: buy a stock for $50 a share
Bull market
A steady rise in the stock market over a period of time
Bear Market
A steady drop in the stock market over a period of time
Dow Jones industrial Average
Index that shows how certain stocks have traded
Example: certain stocks have been trading daily since 1896 and it shows their stock as a whole
S&P 500
Index that shows the price changes of 500 different stocks
Example: mainly stocks listed on the NYSE
Great Crash
The collapse of the stock market in 1929
Example: otherwise known as the Great Depression
Speculation
The practice of making high-risk investments with borrowed money in hopes of getting a big return
Example: what happened before the Great Depression
Daytrading
Try to predict minute-by-minute price changes based on computer programs that tell the trader when to buy and sell
Fate of the dot-coms (pg 293)
Companies taking advantage of the potential business opportunities offered by the internet
Example: America online
1 Point: (x5)
(Posts about articles related to class topics)
-This article is related to class topics because it is about a man who earned enough money from the stock market to retire. He offers tips on how to make the right investing decisions. http://money.cnn.com/2015/03/09/retirement/dream-retirement-million-dollar-saving/index.html?iid=HP_LN
-This article offers more analysis about the Great Depression than our book did, which briefly went over its concept but didn't offer a lot of history. This is a good read for anyone whose interest was provoked by our books talking about the Great Depression! http://topics.nytimes.com/top/reference/timestopics/subjects/g/great_depression_1930s/index.html
-This article gives a lot of reasons to buy savings bonds. Savings bonds were a topic we discussed in class and by reading this I really want to go out and buy one on my own! http://www.investopedia.com/articles/02/121302.asp
-This article talks about whether or not the US government should increase regulation on its businesses, which was a topic that had its own article in the book. It's always good to see another perspective, so this is another article about the topic. http://www.investopedia.com/articles/economics/08/free-market-regulation.asp
-This article from investopedia, a great website, is about the value of money. Money was one of the interesting concepts that we discussed in economics class, and this article helps students understand the value of money. http://www.investopedia.com/articles/03/082703.asp
-http://quizlet.com/76175655/economics-unit-4-flash-cards/
-Unit 4 Vocabulary
Chapter 10
Money
anything that serves as a medium of exchange, a unit of account, and a store of value
Example: Cash
Medium of exchange
anything that is used to determine value during the exchange of goods and services
Example: Credit cards
Barter
The direct exchange of one set of goods or services for another
Example: Traditional trades like trading gold for a boat
Unit of account
A means for comparing the values of goods and services
Example: Money
Store of value
Something that keeps its value if it is stored rather than used
Example: keeping money in a bank
Currency
Coins and paper bills used as money
Example: the dollar bill
Commodity money
Objects that have value in themselves and that are also used as money
Example: salt
Representative money
Objects that have value because the holder can exchange them for something else of value
Example: IOU
Fiat money
Money that has value because the government has ordered that it is an acceptable means to pay debts
Example: United States money today
Gold standard
a monetary system in which paper money and coins are equal to the value of a certain amount of goods
Example: the US after the 1870s
6 characteristics of money
Durability, portability, divisibility, uniformity, limited supply, and acceptability
Banks
An institution for receiving, keeping, and lending money
Example: TCF Bank
National bank
A bank chartered, or licensed, by the national government
Example: the Bank of the United States
Bank run
Widespread panic in which great numbers of people try to redeem their paper money
Example: 1837
Greenbacks
Paper currency issued during the Civil War
Federal Reserve System
The nation's central banking system
Central bank
Bank that can lend to other banks in times of need
Example: Federal reserve banks
Member bank
Bank that belongs to the Federal Reserve System
Federal reserve note
The national currency we use today in the United States
Example: Dollar bill
Great depression
The severe economic decline that began in 1929 and lasted for more than a decade
Federal deposit insurance corporation
The government agency that insures customer deposits if a bank fails
Money supply
All the money available in the United States economy
Liquidity
The ability to be used as, or directly converted to, cash
Example: currency
Demand deposit
The money in checking accounts
Money market mutual fund
A fund that pools money from small savers to purchase short-term government and corporate securities
Example: savings deposits
Fractional reserve banking
A banking system that keeps only a fraction of funds on hand and lends out the remainder
Example: families paying for college tuition
Default
Failure to pay back a loan
Example: the bank loses money
Mortgage
A specific type of loan that is used to buy real estate
Example: a down payment on a house then paying over a period of time
Credit card
A card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services
Interest-simple vs. compound
Simple: paid only on principle
Compound: interest paid both on principle and accumulated interest
Principal
The amount of money borrowed
Example: paying someone $5
Debit card
A card used to withdraw money
Example: TCF debit card
Creditor
Person or institution to whom money is owed
Example: Visa
Types of financial institutions
Commercial banks, savings and loan associations, savings banks, credit unions, finance companies
Should the government increase regulation of financial markets? (pg 268-269)
Government should increase regulation of financial markets only by a very limited amount to prevent fraud and unrealistic expectations from consumers.
Chapter 11
Investment
The act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
Example: stocks
Financial system
The system that allows the transfer of money between savers and borrowers
Example: banks
Financial asset
Claim on the property or income of a borrower
Example: loans
Financial intermediary
Institution that helps channel funds from savers to borrowers
Example: banks
Mutual fund
Fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
Example: stock portfolios
Diversification
Spreading out investments to reduce risk
Example: investing in many different types of companies in the stock market rather than just one
Portfolio
A collection of financial assets
Prospectus
An investment that reports to potential investors
Example: intermediaries report
Return
The money an investor receives above and beyond the sum of money initially invested
Example: profits made in the stock market
Risk
How stable and investment is
Example: CDs aren't a risk
Bonds
Basically loans, or IOUs, that represent debt that the government or a corporation must repay to an investor.
Example: savings bonds
Coupon rate
The interest rate that a bond issuer will pay to a bondholder
Example: 50%
Maturity
The time at which payment to a bondholder is due
Example: Bond bought in 2010 has maturity in 2020
Par value
The amount that an investor pays to purchase a bond and that will be repaid to an investor at maturity
Example: a $25 bond that pays you $50
Yield
The annual rate of return on a bond if the bond were held to maturity
Example: 5%
Savings bond
Low-denomination bond issued by the United States government
Example: A savings bond for $50
Municipal bond
A bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks, and schools
Example: A bond issued by Minnesota
Corporate bond
A bond that a corporation issues to raise money to expand its business
Example: A bond issued by Apple
Securities and exchange commission
An independent agency of the government that regulates financial markets and investment companies
Example: the SEC
Junk bond
A lower-rated, potentially higher-paying bond
Example: bonds popular in the 1980s and 1990s
Capital market
Market in which money is lent for periods longer than a year
Example: long-term CDs
Money market
Market in which money is lent for periods of less than a year
Example: short-term CDs
Primary market
Market for selling financial assets that can only be redeemed by the original holder
Example: savings bonds
Secondary market
Market for reselling financial assets
Example: stock market
Buying bonds at a discount
Buying a bond for less than its par value
Bond ratings
How an investor decides which bonds to buy
Treasury bonds, Treasury bills, Treasury notes
Offer different lengths of maturity
Share
Portion of stock
Example: 200 shares of Apple
Equities
Claims of ownership in a corporation
Example: stocks
Capital gain
The difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller
Example: Selling stock for more than you bought it for
Capital loss
The difference between a lower selling price and a higher purchase price resulting in a financial loss to the seller
Example: Selling stock for less than you bought it for
Stock split
The division of a single share of stock into more than one share
Example: owners of a common stock
Stockbroker
A person who links buyers and sellers of stock
Example: you hire them to help you choose what to invest in
Brokerage firm
A business that specializes in trading stocks
Example: a place where lots of stockbrokers work
Stock exchange
A market for buying and selling stock
Example: the New York Stock Exchange
Nasdaq
American market for OTC securities
Example: Amazon is part of Nasdaq
OTC market
An electronic marketplace for stocks and bonds
Example: buying directly from a dealer or broker
Futures
Contracts to buy or sell at a specific date in the future at a price specified today
Example: a buyer and seller might agree today on a price of $4.50 for a bushel of soybeans sic or nine months in the future
Options
Contracts that give investors the choice to buy or sell stock and other financial assets
Example: buying a specific stock at a specific price
Call option
The option to buy shares of stock at a specified time in the future
Example: pay $10 today for a call option
Put option
The option to sell shares of stock at a specific time in the future
Example: buy a stock for $50 a share
Bull market
A steady rise in the stock market over a period of time
Bear Market
A steady drop in the stock market over a period of time
Dow Jones industrial Average
Index that shows how certain stocks have traded
Example: certain stocks have been trading daily since 1896 and it shows their stock as a whole
S&P 500
Index that shows the price changes of 500 different stocks
Example: mainly stocks listed on the NYSE
Great Crash
The collapse of the stock market in 1929
Example: otherwise known as the Great Depression
Speculation
The practice of making high-risk investments with borrowed money in hopes of getting a big return
Example: what happened before the Great Depression
Daytrading
Try to predict minute-by-minute price changes based on computer programs that tell the trader when to buy and sell
Fate of the dot-coms (pg 293)
Companies taking advantage of the potential business opportunities offered by the internet
Example: America online
1 Point: (x5)
(Posts about articles related to class topics)
-This article is related to class topics because it is about a man who earned enough money from the stock market to retire. He offers tips on how to make the right investing decisions. http://money.cnn.com/2015/03/09/retirement/dream-retirement-million-dollar-saving/index.html?iid=HP_LN
-This article offers more analysis about the Great Depression than our book did, which briefly went over its concept but didn't offer a lot of history. This is a good read for anyone whose interest was provoked by our books talking about the Great Depression! http://topics.nytimes.com/top/reference/timestopics/subjects/g/great_depression_1930s/index.html
-This article gives a lot of reasons to buy savings bonds. Savings bonds were a topic we discussed in class and by reading this I really want to go out and buy one on my own! http://www.investopedia.com/articles/02/121302.asp
-This article talks about whether or not the US government should increase regulation on its businesses, which was a topic that had its own article in the book. It's always good to see another perspective, so this is another article about the topic. http://www.investopedia.com/articles/economics/08/free-market-regulation.asp
-This article from investopedia, a great website, is about the value of money. Money was one of the interesting concepts that we discussed in economics class, and this article helps students understand the value of money. http://www.investopedia.com/articles/03/082703.asp