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Money And Banking > Chapter 1 > Flashcards

Chapter 1 Flashcards

0
Q

What is a security?

A

A claim on the issuer’s future income or assets

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1
Q

What are financial markets?

A

Markets in which funds are transferred from people who have an excess of available funds to people who have a shortage

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2
Q

What is a bond?

A

A debt security that promises to make payments periodically for a specified period of time

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3
Q

Why are bonds important?

A

It enables corporations and governments to borrow to finance their activities and it is where interest rates are determined

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4
Q

What is an interest rate?

A

The cost of borrowing or the price paid for rental fund

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5
Q

Why are interest rates important?

A

Personal-high interest rates could deter you from making some purchases
Might encourage you to save because you ,ale more income from savings interest

General-impact on health of economy because they effect consumers willingness to spend or save and a business’ decisions

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6
Q

What is true of interest rates on three month treasury bills?

A

Fluctuates more than other interest rates and is lower on average

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7
Q

What is true of the interest rates on Baa corporate bonds?

A

High than other interest rates

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8
Q

What is common stock?

A

Same as stock

A share of ownership in a corporation

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9
Q

What is “the market”?

A

The stock market
Where claims on the earnings and assets are traded
Most follower financial market

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10
Q

Are stock prices volatile?

A

Yes

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11
Q

What are financial intermediaries?

A

Institutions that borrow funds from people who have saved and in turn make loans to others

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12
Q

What is a financial crisis?

A

Major disruption in financial markets that are characterized by sharp declines in asset prices and the failure of many financial and non financial firms

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13
Q

What are banks?

A

Financial institutions that accept deposits and make loans

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14
Q

What are included under the term bank?

A

Commercial banks, savings and loan associations, mutual savings banks, and credit unions

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15
Q

What is the largest financial intermediary in this country?

A

Banks

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16
Q

What is financial innovation?

A

Development of new financial products and services
Makes finial systems more efficient
Can sometimes have bad results

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17
Q

What is e-finance?

A

Ability to deliver financial services electronically

18
Q

What is money?

A

Money supply

Anything generally accepted in payment for goods and services or in payment of debt

19
Q

What is aggregate output?

A

Total production of goods and services

20
Q

What is unemployment rate?

A

Percentage of available labor force unemployed

21
Q

What is the business cycle?

A

Upward and downward movement of aggregate output produced in the economy

22
Q

What is a recession?

A

Period of declining aggregate output

23
Q

What is monetary theory?

A

Theory relating quantity of money and monetary policy to changes in aggregate economic activity and inflation

24
Q

What is aggregate price level?

A

Average price of goods and services in the economy

25
Q

What is inflation?

A

A continual increase in the price level

It affects businesses, government, and individuals

26
Q

What causes inflation?

A

They is a connection between price level and money supply, continued rise in money supply may lead to increased inflation

27
Q

What is inflation rate?

A

Rate of change of the price level, usually measured as a percentage change per year

28
Q

Is there a relationship between money and interest rates?

A

Yes, they are directly correlated, however it has been less clear cut since 1980

29
Q

What is monetary policy?

A

Management of money and interest rates

30
Q

What is the central bank responsible for?

A

The conduct of the nation’s monetary policy

31
Q

Who is the United States’ central bank?

A

The federal reserve

32
Q

What is fiscal policy?

A

Decisions about government spending and taxation

33
Q

What is a budget deficit?

A

Excess government expenditures over tax revenues for a particular time period

34
Q

What is a budget surplus?

A

When tax revenues exceed government expenditures

35
Q

What is GDP?

A

A measure of aggregate output

Market value of all final goods and services produced in a country during a year

36
Q

What must be done when funds are transferred from one country to another?

A

Currency must be transferred from that of origin to the destination

37
Q

What is the foreign exchange market?

A

Where the conversion of currency takes place as funds transfer among countries

38
Q

What is foreign exchange rate?

A

Price of one country’s currency in terms of another’s

39
Q

What affect does a change in exchange rate have on citizens?

A

Affects costs of imports

40
Q

What is aggregate income?

A

Total income of factors of production from producing goods and services in the economy during the course of the year

41
Q

What is nominal?

A

Values measured using current prices

42
Q

What is real?

A

Adjusted based on a base year

43
Q

What is gdp deflator?

A

Nominal/real gdp

Money And Banking (5 decks)

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