Chapter 1 Flashcards
What is a security?
A claim on the issuer’s future income or assets
What are financial markets?
Markets in which funds are transferred from people who have an excess of available funds to people who have a shortage
What is a bond?
A debt security that promises to make payments periodically for a specified period of time
Why are bonds important?
It enables corporations and governments to borrow to finance their activities and it is where interest rates are determined
What is an interest rate?
The cost of borrowing or the price paid for rental fund
Why are interest rates important?
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
What is true of interest rates on three month treasury bills?
Fluctuates more than other interest rates and is lower on average
What is true of the interest rates on Baa corporate bonds?
High than other interest rates
What is common stock?
Same as stock
A share of ownership in a corporation
What is “the market”?
The stock market
Where claims on the earnings and assets are traded
Most follower financial market
Are stock prices volatile?
Yes
What are financial intermediaries?
Institutions that borrow funds from people who have saved and in turn make loans to others
What is a financial crisis?
Major disruption in financial markets that are characterized by sharp declines in asset prices and the failure of many financial and non financial firms
What are banks?
Financial institutions that accept deposits and make loans
What are included under the term bank?
Commercial banks, savings and loan associations, mutual savings banks, and credit unions
What is the largest financial intermediary in this country?
Banks
What is financial innovation?
Development of new financial products and services
Makes finial systems more efficient
Can sometimes have bad results
What is e-finance?
Ability to deliver financial services electronically
What is money?
Money supply
Anything generally accepted in payment for goods and services or in payment of debt
What is aggregate output?
Total production of goods and services
What is unemployment rate?
Percentage of available labor force unemployed
What is the business cycle?
Upward and downward movement of aggregate output produced in the economy
What is a recession?
Period of declining aggregate output
What is monetary theory?
Theory relating quantity of money and monetary policy to changes in aggregate economic activity and inflation
