Investing and Free Enterprise Flashcards
Investment
redirecting resources from being consumed today so that they may create benefits in the future
Investing is the use of assets to earn ____ or _____.
income/ profit
Investing is part of the _________.
free interprise system
______ money to day to ______ money in the future.
Spend/earn
Examples: going to college to get a “better job”.
Expanding manufacturing for a new product.
Building a dam for a hydroelectric plant.
In order for ______ to take place, an economy must have a ________.
Investment/ financial system
What is a financial system?
a system in which there is a transfer of money between the savers and borrowers.
What are financial assets?
a claim on the property or income of a borrower.
Make _____ to financial institutions to ______ financial assets.
deposits/ receive
What are some financial institutions?
Banks, Credit Unions, Finance companies, etc.
You make _____ to investors.
loans
Government and businesses build ____, _______, ______ etc. Also they develop new products, markets, or services.
roads, factories, homes
You can obtain a direct link between _____ and _____.
savers and borrowers
The ____ potential return, the risker the investment
higher
What are financial intermediaries?
intitutions that help channel funds from savers to borrowers
What is a pension fund?
Income a retiree receives after working a certain number of years. Also, they withhold a portion of their pay.
Why have financial intermediaries? (3 reasons)
- share risk
- provide information
- provide liquidity to investors
______: spreading out investment to reduce risk.
diversification
How do you monitor a borrower’s spending and income?
Through a portfolio (which is a collection of financial assets)
_______: the ease with which people can convert assets into cash. (house stock)
Liquidity
Using a CD to earn a _____ rate, but having limited access in an emergency.
higher
The ___ potential return, the riskier the investment.
higher
