Unit 4 Ch. 10-11 Flashcards
Medium of exchange
Anything that is used to determine value during the exchange of goods and services
Money
Anything that serves as a medium of exchange, a unit of account, and store a value
Barter
The direct exchange of one set of goods or services for another
Unit of account
A means for comparing the values of goods and services
Store of value
Something that keeps its value if it is stored rather than used
Currency
Coins and paper bills used as money
Commodity money
Objects that have value in themselves and that are also used as money
Representative money
Objects that have value because the holder can exchange them for something else of value
Fiat money
Money that has value because the government has ordered that it is an acceptable means to pay debt
Bank
An institution for receiving, keeping, and lending money
National bank
A bank chartered,or licensed, by the national government
Bank run
Widespread panic in which great numbers of people try to redeem their paper money
Greenback
Paper currency issued during the civil war
Good standard
A monetary system in which paper money and coins are equal to the value of a certain amount of gold
Federal reserve system
The nations central banking system
Central bank
Bank that can lend to other banks in times of need
Member bank
Bank that belongs to the federal reserve system
Federal reserve note
The national currency we use today in the United States
Great Depression
The severe economic decline that began in 1929 and lasted for more than a decade
Federal deposit insurance corporation
The government agency that insures customer deposits if a bank fails
Money supply
All the money available in the United States economy
Liquidity
The ability to be used as, or directly converted to, cash
Demand deposit
The money in checking accounts
Money market mutual fund
A fund that pools money from small savers to purchase short-term government and corporate securities
Fractional reserve banking
A banking system that keeps only a fraction of funds on hand and lends out the remainder
Default
A failure to pay back a loan
Mortgage
A specific type of loan that is used to buy real estate
Credit card
A card entitling its holder to buy goods and services based on the holders promise to pay for these goods and services
Interest
The price paid for the use of borrowed money
Principal
The amount of money borrowed
Debit card
A card used to withdraw money
Creditor
Person or institution to whom money is owed
Investment
The act of redirecting resources from being consumed today so that they create benefits in the future; the use of assets to earn income or profit
Financial system
The system that allows the transfer of money between savers and borrowers
Financial asset
Claim on the property or income of a borrower
Financial intermediary
Institution that helps channel funds from savers or borrowers
Mutual fund
Fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets
Diversification
Spreading out investments to reduce risk
Portfolio
A collection of financial assets
Prospectus
An investment report to potential investments
Return
The money an investor receives above and beyond the sum of money initially invested
Coupon rate
The interest rate that a bind issuer will pay to a bond holder
Maturity
The time at which payment to a bond holder is due
Per value
The amount that an investment pays to purchase a bond and that will be repaid to the investor at maturity
Yield
The annual rate of return on a bond if the bond were held to maturity
Savings bonds
Low-denominations bond issued by the United States government
Municipal bond
A bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks, and schools
Corporate bond
A bond that a corporation issues to raise money to expand its business
Securities and exchange commission
An independent agency of the government that regulates financial markets and investment companies
Junk bond
A lower rated, potentially higher paying bond
Capital market
Market in which money is lent for periods of less than a year
Money market
Market in which the money is lent for periods of less than a year
Primary market
Market for selling assets that can only be redeemed by the original holder
Secondary market
Market for reselling financial assets
Share
Portion of stock
Equities
Claims of ownership in a corporation
Capital gain
The difference between a higher selling price and a lower purchase price, resulting in a financial gain for the seller
Capital loss
The difference between a lower selling price and a higher purchase price resulting in a financial loss to the seller
Stock split
The division of a single share of stock into more than one share
Stockbroker
A person who links buyers and sellers of stock
Brokerage firm
A business that specializes in trading stocks
Stock exchange
A market for buying and selling stock
OTC market
An electronic marketplace for stocks and bonds
Nasdaq
American market for OTC securities
Futures
Contracts to buy or sell at a specific date in the future at a price specified today
Options
Contracts that give investors the choice to buy or sell stock and other financial assets
Call option
The option to buy shares of stock at a specified time in the future
Put option
The option to sell shares of stock at a specified time in the future
Bull market
A steady rise in the stock market over a period of time
Bear market
A steady drop in the stock market over a period of time
S&P 500
Index that shows the price changes of 500 different stocks
The Dow
Index that shows how certain stocks have been traded
Great crash
The collapse of the stock market in 1929
Speculation
The practice of making high risk investments with borrowed money in hopes of getting a big return
