Chapter 8 Flashcards
Most transactions use___and ____as they are considered a more efficient way to do business is compared to the barter system
Cash and near-cash items
Enumerate the three main roles of money
- Medium of exchange, as it is generally accepted as payment for goods and services
- a store of value, and the unit of account 3. a standard measurements that generally determines the value of things
Used as a medium of exchange; it has value because everyone thinks that it has value
Money
It is considered a legal tender, that currently, it is the form, by law, a debtor may require a creditor to accept in payment of a debt
Money
Gaining popularity in the digital financial system
Bitcoins
Are not regulated in any specific country, are considered a speculative asset, and are accepted by a few groups of people.
Bitcoins
Network of institutions, markets, and contracts, that bring together lenders and borrowers
Financial system
Two main players in the system
- Lenders
2.borrowers
They believe that money that they have now has the potential of snowballing in the future. Hence they lend it to financial institutions like a bank.
Lenders
Can be a household that needs to buy, but does not have enough money and hand to acquire it; a firm that needs some more capital to fund an asset; or the government that typically spends more than it owns.
Borrowers
The lender is in Barrow were agreed to fulfill their goals a few exchanges in: (Enumerate them)
- Banking system.
- Government.
- Stock market.
This is where depositord are considered lenders, and those who loan funds for themselves, the bond market
Banking system
May choose to acquire its funds, by issuing an IOU promising to pay on a regular basis, and the principle at a certain date
Government
It is basically a place for ownership in a company may be sold and bought
Stock market
Fluctuations in the stock market are not dependable metrics of _____
Economic well-being
Changes in the stock market may just be reactions to _______in the performance of any economy or of the company
real or perceived changes
True or false
Money is a liability of the central bank
True
True or false
Real asset is something with intrinsic value
True
What are examples of financial system?
- Crowd sourcing of funds
- raising capital from investors
- distributing the risk that is attached to the investment
It means committing funds to one or more assets, which can be a financial or real asset
Investment
It may be understood as a part of wealth that may be used to fund the investment of another
Savings
It is someone else’s liability and are manufactured by the stock market, or any financial institution
Financial asset
Examples are valuable pieces of jewelry machines or other physical assets that may be traded in a hard market
Real asset
It means that the stock market creates assets, traded that are intangible
Manufactured
What are the five investment assets that are traded in the market?
Stocks
Bonds
Currencies
Real estate
Commodity
Securities that mature, and less than one year that are traded in the money market
Short term instruments
Mature more than a year that are traded in the capital market
Long-term instruments
forms of financial instrument value of which is derived from another instrument
Financial derivatives
forms of financial instrument value of which is derived from another instrument
Financial derivatives
An example of financial derivatives were in the stock is the base, and the option would be its derivative
Stock option
It refers to the coins pieces of stamped metals used as a trading medium. Any currencies used in the same way
Money
It means money on hand
Cash
The market for longer loanable funds
Capital market
Instruments used as evidence of a borrowers that to a lender. It is used by companies to finance.
Debentures
Enumerate the process of investment
Portfolio management
Allocation of assets
Construction decision
Building that collection or set of assets
Portfolio management
Splitting of the portfolio into five or less types of investment classes
Allocation of assets
Choosing from the top down or bottom up approaches in portfolio management
Construction decision
Tries to allocate assets by country or region,, as well as the type of asset
Top down portfolio management
Looking at specific company, then investing in it with the tendency of investing in just one country and or one class
Bottom up
Involves channeling of funds, by means of financial intermediaries, transferring and scheduling of risks, appropriation of the investment class and managing ownership of funds
Investment management
Examination of the control of a company as exercised by its directors
Corporate governance
What are the key players in financial systems?
Firm
Household
Government
Financial intermediaries
Businesses issuing securities, ( debt and equity) or financial instruments
Firm
The one who lend in borrow from financial intermediaries
Household
the one that never over funds and this considered always in shortage
Government
It’s a one that positions between the debtors and the creditors
Financial intermediaries
Are able to fund a technology based industry and employee more workers
Prospective venture capitalists
Issued debenture and shares to public and other fund institutions that are expecting good returns from fixed or fixed assets
Capital markets
Help address transactions that involve foreign currencies help raise funds for these companies and support the Forex requirement of some companies who are dealing with other countries
Foreign exchange markets
Set as a policy is establishing development, banks and merchant banks to raise funding for infrastructure buildings
Economic liberalization
Allow companies with investable fund stories in highly risky information and technology, business or promote other new ventures
Venture capitalist
Would discourage migration from rural to urban areas
Equitable interest rates
Having a good financial system allows balance in the industrial agriculture and service sectors
Sustain macro economics
Equitable interest, interest interest rates offered in various places with discourage migration from rural to urban areas
Balance regional development
Trade practice legislation, in terms of market, and the use of one common currency just like the European Union
Foster economic integration
Vigorous financial systems in one economy, and potential investors in various sectors
Attract foreign investment
Vigorous financial systems in one economy, and potential investors in various sectors
Attract foreign investment
Loss and other legislation may be enforced to mitigate the risks of unwanted and speculative
Uphold fiscal policy
Allows companies with investable funds to invest in highly risky information and technology, business or promote other new ventures
Infrastructure technology development
It allows the issuance of letters of credit finance, them, and even offer to discount some financial instruments like bill
Trade development
Helps address trans sections that involve foreign currencies help praise funds for these companies and support the Forex requirement
Capital securities market
Opportunities for bunks and other financial institutions, like funds and other others, to have more skilled workers
Develop labor employment
