Week 1 - investment background

Question 1

what are real assets?

Answer 1

assets used to produce goods and services (e.g. property)

Question 2

What are financial assets?

Answer 2

claims on real assets or the income generated by them (shares and bonds)

Question 3

What is the net wealth of an economy? and why?

Answer 3

the sum of its real assets because all financial assets are offset by financial liabilities

Question 4

what are the 3 classes of financial assets

Answer 4

shares bonds and derivatives

Question 5

explain the household sector and its characteristics

Answer 5

the household sector is made upp of individuals in the economy, they:
- provide labour in exchange for income
- purchase goods and services from firms
- borrow or save money from the financial sector
- pay taxes to government

Question 6

explain the firms sector and its characteristics

Answer 6

made up of all businesses in the economy, they:
- produce output in exchange for revenue in the household sector
- borrow money from, or save with the financial sector
- pay taxes to the government

Question 7

explain the financial sector

Answer 7

made up of banks and other financial institutions, they:
- receive savings from households or firms
- they help households and firms invest by lending them money

Question 8

explain the government sector

Answer 8

made up of all federal state and local governments, they:
- receive taxation revenue from households and firms
- they spend money on public goods and services, such as roads, parks and hospitals.