Chapter 10 Quiz Flashcards
1
Q
Barter
A
- direct exchange of goods + services
2
Q
Money
A
anything that can be used as
- medium of exchange (can buy stuff)
- unit of account (compare values)
- store of value ( you can save it)
3
Q
Currency
A
- bills + coins used as money (all money is currency, not all currency is money)
4
Q
6 Characteristics of money
A
- Portability (can carry it around)
- Durability (wear + tear)
- Uniformity (all units worth the same)
- Divisibility (can be broken into smaller parts)
- Limited supply
- Acceptability (everyone agrees to use it)
5
Q
3 types of Money
A
- Commodity Money: something that has value on its own
- Representative Money: paper money backed by a commodity (Gold Standard)
- Fiat Money: money that has value because the government said so
6
Q
Fractional Reserve Banking
A
- a system where banks only keep a portion of deposits on hand, and lend out the rest
(how banks make money)
7
Q
Bank Run
A
- panic where all customers try to withdraw their money at once
8
Q
Federal Reserve
A
- US central bank
9
Q
Federal Deposit Insurance Corporation (FDIC)
A
- insures deposits up to $250,000
10
Q
Money Supply
A
- total amount of money in an economy
- M1: cash, checking
- M2: cash, checking, saving accounts
11
Q
Banks
A
- institution for keeping, storing and lending money
- connecting savers and borrowers
12
Q
Bank Services
A
- Loans: mortgage (loan used to purchase real estate)
- Installment Loans (car loans)
13
Q
4 Types of accounts
A
- Saving accounts: your money is lent out
- Checking accounts: your money is liquid
- Certificated of deposit: savings account where you can’t withdraw the money for a set time (CD)
- Money Market Account/ Money Market Mutual Fund: pools money to invest in bonds (not FDIC insured)
14
Q
Credit Unions
A
- cooperatively owned and not for profit
15
Q
Investing
A
- using your money to make money
16
Q
Return
A
- money earned on top of an initial investment
17
Q
Risk of Investments
A
- the possibility of your investment losing money
18
Q
Liquidity
A
- the ability of an asset to be used as or converted into cash
19
Q
Asset
A
- anything of value
20
Q
Financial System
A
- system that allows savers/ borrowers/ investors to easily find each other
21
Q
Financial Intermediary
A
- Commercial banks/ investment banks/ credit unions
22
Q
Diversification
A
- spreading investment across multiple assets to reduce risk
23
Q
Bonds
A
- a certificate representing a loan issued to a government or corporation (how governments borrow money)
24
Q
3 Components of Bonds
A
- Coupon rate: interest rate paid on the bond (this drives return)
- Maturity Date: when bond pays out (when payment is due)
- Par Value: what bonds costs/ pays out
25
5 Types of bonds (safest to riskiest)
1. Savings Bonds: issued by US govt.
2. Treasury Bonds
3. Municipal Bonds: issued by local govts.
4. Corporate Bonds: issued by corporations
5. Junk Bonds: high risk bond; issued by someone who has declared bankruptcy
26
Stocks
- certificate representing ownership in a corporation
27
2 ways to profit from stock
1. Capital Gain: sell stock for more than you paid (share prices can go down)
2. Dividend: share of profits paid to shareholders (companies may lose money or not pay dividends)
28
2 Types of Stocks
1. Income Stock: pays a dividend
| 2. Growth Stock: doesn't pay a dividend
29
2 different exchanges
- NYSE: large, traditional companies
| - NASDAQ: tech and energy
30
Stock Indexes
- estimate market performance by tracking a representative sample of corporations
31
Dow Jones (DIA)/ S+P500 (SPDR)
30 Companies/500 companies
32
Mutual Funds
- pooling money from investors to buy a diverse range of stocks, bonds, and other assets (easy diversification/ less personal control)
33
Interest
- price paid to borrow money (cost of borrowing)
| - price you are paid as a lender
