AP Econ M22

Module 22 Vocab

Investment spending

When businesses spend money on things like machines, buildings, and equipment to help them produce more in the future

Wealth

The total value of everything a person owns (like money, property, and stocks) minus what they owe.

Transaction costs

The extra costs of making a trade or deal, such as fees, paperwork, or time spent negotiating.

Budget balance

The difference between how much a government collects in taxes and how much it spends. A positive balance means a surplus; a negative balance means a deficit.

Physical asset

A tangible item like land, a building, or machinery that has value and can be used to produce goods or services.

Financial risk

The chance that an investment might lose money or that a borrower might not repay a loan.

Diversification

Spreading investments across different assets to reduce risk (like not putting all your eggs in one basket).

Loan

Money borrowed that must be paid back later, usually with interest.

Loan-backed securities

Investments made up of many individual loans (like mortgages) that are bundled together and sold to investors.

Financial intermediary

A business, like a bank, that connects people who want to save money with people or businesses that need to borrow money

Illiquid

An asset that cannot easily be converted into cash without losing value or taking a long time to sell (like a house or a rare painting).

Default

When a borrower fails to repay a loan as agreed.

Mutual fund

A pool of money from many investors that is managed by professionals and used to buy a mix of stocks, bonds, or other investments.

Budget deficit

When a government spends more money than it collects in taxes.

Pension fund

A special type of investment fund that collects money from workers and employers to provide retirement income in the future.