Finance Assets and Money

Question 1

Anything that can be used to buy goods and services

Answer 1

Money

Question 2

Accumulation of saving through the purchase of assets that occurs over time

Answer 2

Wealth

Question 3

Intangible assets, such as savings accounts and securities, that are acquired for some promised future return

Answer 3

Financial Assets

Question 4

Loans, bonds, loan-backed securities, stocks, Direct Deposits (Checking Account), etc.

Answer 4

Types of Financial Assets

Question 5

A debt evidenced by a “note,” which specifies the principal amount, interest rate, and date of repayment.

Answer 5

Loan

Question 6

A formal contract to repay borrowed money with interest at fixed intervals (pretty much the same as a loan only used by big institutions, like the government and big business).

Answer 6

Bond

Question 7

A share of ownership in a corporation

Answer 7

Stock

Question 8

A financial intermediary that provides liquid assets in the form of bank deposits to lends and uses those funds to finance the illiquid investment spending needs of borrowers.

Answer 8

Bank

Question 9

The ease with which an asset can be converted into cash

Answer 9

Liquidity

Question 10

A system for buying and selling shares of companies

Answer 10

Stock Market

Question 11

the market in which bonds issued by firms and governments are traded

Answer 11

Bond Market

Question 12

An amount owed by a business or an individual

Answer 12

Liability

Question 13

Interest Rate

Answer 13

Opportunity Cost of Holding Money

Question 14

Inverse Relationship - if interest rates increase, the value of previously issued bonds decreases and if the interest rate decreases, the value of previously issued bonds increases

Answer 14

Relationship between Bonds and Interest Rate

Question 15

The interest rate as usually reported without a correction for the effects of inflation

Answer 15

Nominal Interest Rate

Question 16

nominal interest rate - inflation rate

Answer 16

Real Interest Rate

Question 17

Nominal Interest Rate = Real Interest Rate + Inflation Rate

Answer 17

Fisher Effect

Question 18

A future rate of inflation that consumers and firms build into current decision making.

Answer 18

Expected Inflation

Question 19

The component of inflation that is a surprise.

Answer 19

Unexpected Inflation

Question 20

An interest that’s able to change based on rate set by the central bank

Answer 20

Flexible Interest Rates (also known as floating or variable interest rates)

Question 21

Medium of Exchange, Unit of Account, Store of Value

Answer 21

3 Functions of Money

Question 22

Anything that’s used to determine value during the exchange of goods and services

Answer 22

Medium of Exchange

Question 23

A means for comparing the values of goods and services

Answer 23

Unit of Account

Question 24

Something that keeps its value if it’s stored rather than used.

Answer 24

Store of Value

Question 25

Objects that have value in themselves and that’re also used as money (e.g. Gold)

Answer 25

Commodity Money

Question 26

The quantity of money available in the economy

Answer 26

Money Supply

Question 27

Monetary Base: Currency and Bank Reserves

Answer 27

M0

Question 28

Currency in circulation, demand deposits, savings accounts.

Answer 28

M1

Question 29

M1 + small denomination time deposits (CDs) + money market deposit accounts

Answer 29

M2

Question 30

An interest rate that doesn’t change

Answer 30

Fixed Interest Rate

Question 31

Money that has value because the government has ordered that it is an acceptable means to pay.

Answer 31

Fiat Money