Definitions Flashcards
Opportunity cost
The next best alternative given up when you make a decision
Ex) gap year or uni
Inflation
A rise in the average price level of goods and services in the economy
Deflation
When prices decline across a sector or the entire economy
Freezes economic growth
Hyperinflation
Inflation rises rapidly, causing a rapid decrease in the value of currency. Prices rise at least 50% each month
Ex) post war; civil unrest
CPI
Tracks changes in price consumers pay per month for certain goods and services. Uses basket of goods approach and looks at 8 major categories. Formula is current (price-former price)/ former price
Asset
Something you own that has positive value
Liability
Something that you owe or something that has negative economic value
Liquid asset
Things that can easily be exchanged for cash
Net worth
Rough representation of your financial position at one point in time
Asset-liabilities
Appreciate
Something that goes up in value after you buy it
Ex) land/property, real estate, some designer items, investments and stock
Depreciate
Something that goes down in value after you buy it
Ex) cars, most clothing, electronics, machinery, and appliances
Intrinsic value
When money has value in and of itself
Ex) money made from gold or silver
Fiat money
When money has no value in and of itself but only in terms of the value it represents and what it is able to buy- it’s purchasing power
Legal tender
The official money in a country that is widely accepted
Exchange rate
The value of one country’s currency in terms of the currency of another country
Foreign exchange market
Locations where the currency of one country can be exchanged for the currency of another country
Bartering
When one item is exchanged directly for another without using money
Medium of exchange
One of the roles of money where money makes it easier to acquire goods and services we need and want
Purchasing power
The ability of money to acquire goods and services. As prices rise, the purchasing power of money falls.
Bank of Canada
Canadas central bank that holds the responsibility, among other things, of influencing interest rates to keep prices relatively stable and protect the purchasing power of Canada’s money.
Financial planning
Setting goals for things you hope to achieve and acquire over time and making a plan for how to achieve these goals