Saving, Investment And The Financial System

Question 1

Money

Answer 1

Anything that is accepted in exchange for goods or for the payment for debt

Question 2

Fiat money

Answer 2

Money without intrinsic присущий value but nonetheless accepted as money because the gov has made it legal tender.

Question 3

Commodity money

Answer 3

Money whose value comes from a commodity of which it is made

Question 4

Medium exchange

Answer 4

Goods are sold for money, then the money is used to purchase other goods

Question 5

Unit of account

Answer 5

Money provides a yardstick критерия for measuring and comparing the value of a wide variety of goods. Eliminates the problem of double coincidence of wants

Question 6

Formula for determining the number of prices needed when N goods are in economy

Answer 6

N=N(N-1)/2

Question 7

Store of value

Answer 7

Function that enables people to save the money they earn today and use it to buy the goods

Question 8

Liquidity

Answer 8

How fast, easily, and reliably an asset can be converted into cash

Question 9

M1

Answer 9

The narrowest definition of money that measures highly liquid instruments including currency, demand deposits, and other accounts that have check writing or debit capabilities. Equals to: currency, checkable deposits, and demanded deposits

Question 10

M2

Answer 10

Broader definition of money. Includes: M1, saving deposits, money market deposit assess, small denomination, time deposits, shares in retail money market mutual funds

Question 11

Cryptocurrency

Answer 11

Virtual currency. Imp characteristics: not managed by any gov authority in any country

Question 12

Why is supply curve positively sloped?

Answer 12

Higher interest rates bring more funds into the market. The demand for loanable funds is negatively sloped, reflecting the fact that at higher interest rates, fewer investment projects are profitable

Question 13

When does the shift in the supply curve of loanable funds occur?

Answer 13

A factor increase or decrease in the country’s willingness to save at each interest rate

Question 14

Which changes can influence savings patterns?

Answer 14

Changes in economic outlook, incentives to save, income or asset prices, and gov deficit

Question 15

Shift in the demand for loanable funds occur when

Answer 15

Investment tax incentives, tech advanced regulations, product demanded, business expectations

Question 16

Financial system

Answer 16

A complex set of instructions, including banks, bond market, and stock markets, that allocates the scarce resource from savers to borrowers.

Question 17

Financial intermediaries

Answer 17

Financial firms that receive funds from savers and then lend these funds to borrowers. Include commercial banks, saving and loan associations, credit unions, insurance companies, security firms, pension funds

Question 18

What does financial institutions do?

Answer 18

Reduce information costs, reduce transaction costs, spread risks by diversifying assets

Question 19

Return on investment ROI

Answer 19

The earnings, or capital gains, that a saver receives for making funds available to others. ROI=earnings/ amount invested