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Investment
Commitment of current resources in expectation of future profit
Saver
the person who puts their money in the bank
Creditor
the bank that takes the money and lends it to another
Debtor
the one who borrows the money from the bank/saver
Inflation
caused by the printing of excess money
Transaction Account
allows checks or debit withdrawals to occur up to the amount in the account
Check
written order that authorizes a bank to withdraw money from an account
CD
an account that guarantees a set interest rate and a specific maturity date
Money Market Account
allows limited transactions and pays an interest rate that changes with the demand for the loan when there is a certain amount of $ in the account
Jean de la Fontaine
Who wrote The Grasshopper and The Ant
Research and development
What do businesses invest in
FDIC
insures bank accounts up to $250,000
Insurance
contract between two parties in which one party protects the other against certain types of loss in exchange for payments called premiums
Pension Plan
an arrangement provided by an individual’s employer for the intent of providing for the employee’s retirement from work
Defined Benefit Plan
promises to pay a certain amount per month after retirement based on salary and length of service
Defined Contribution Plan
both employer and employee contribute to retirement; not a promised amount (example 401K)
Extended Warranty
insurance for repairs or replacement of a certain item
Collateral
something of value a lender can claim in the event of non-payment
Homeowners Insurance
required if a person takes out a loan to buy a house; in the case of non-payment, the bank forecloses (sells home or property) to recover the balance of a mortgage
Premium
the amount that one pays for a policy
Deductible
the amount you pay each year before the insurance co.pays its share on a claim
Copay
small portion paid for the cost of a doctor’s visit
Unrealized Loss
holding securities that have lost value
Realized Loss
security sold at a loss
Traditional IRA
reduces taxable income for the year it is invested
Roth IRA
contributions are taxable while interest earned on the contributions are not taxable
Educational Savings Account
parents saving for the education of their children
Stocks
resources corporations gather by selling ownership in their business
Corporation
legal entity which is distinct from the people who own it
Shares
equal portions of a corporation’s stock
Stockholder
owns portion of a business determined by the amount of stock he holds
Limited Liability
stockholder does not have to pay firm debts, they only lose their investment
Dividends
shares of a corporation’s profit
Bond
guarantees the bond-holder the amount of the original investment plus interest by a certain date
Mutual Funds
investment companies that combine the resources of all their shareholders and invest the $ in a wide variety of areas
Liquid Investments
assets that flow easily because they can be converted easily into other investments or cash
Bid
an offered price put forth by a buyer
IPO
a new company initially decides to sell shares of stock
Blue-chip Stocks
stock of large companies that have been in existence for a long time
Risk- Averse Investor
choses a lower risk investment when presented with investment options
Compulsory Saving
Legally forcing individuals to save a certain portion of their salary
Social Security
All citizens of America must pay into this old-age insurance fund
Social Security Card
your legal name and a SSN assigned to you
Worker’s Compensation
a form of insurance paid by employers that pays medical expenses caused by an on-the-job injury and compensation for lost wages caused by a work-related injury
Social Security Disability Program
designed for workers who do not have private disability insurance but have paid into SS and get a serious injury that keeps them from working again
Unemployment Insurance
financial help for people who have lost their job through no fault of their own
Survivor Benefits
What can a family member apply for if a loved one died before 62
Money
anything that is generally accepted as a means of payment
Medium
“means” or “agent”
Barter
direct exchange of one goof for another without a standard form of money passing from hand to hand
Measure of Value
allows individuals to know exact value of a good or a service
Store of Value
provides financial security for the future
Portability
easily carried about
Durability
slow to wear out
Homogeneity
standard, recognizable appearance
Divisibility
available for use in large and small units
Constancy
stability in value
Intrinsic Valuableness
worth something in its own right
Specie
coined, metallic money
Debased
lowering the intrinsic value of coins by mixing in less valuable metals
Gresham’s Law
“Bad money drives out good”; people will save stable forms of money and spend less stable forms instead
Face Value
The value (dollar amount) that a type of $ has applied to it
Inflation
too much $ in circulation; value decreases
Deflation
less $ in circulation; value increases
Legal Tender
a type of money that has been accepted as payment in any nation
Bank Notes
original form of money used in America; represented a certain amount of bullion
Fractional Reserve Banking
Allows a bank to hold less than 100% of its total deposits
Fiat Money
Paper money that is backed by only the government promise; no gold or silver
M1
currency in circulation (most narrowly defined); all deposits for transaction accounts, coins, cash, and traveler’s checks
Near Monies
can be converted to M1 because they are highly liquid
M2
savings accounts, money market accounts, and timed deposits less than 100K
Debit Card
money is immediately withdrawn from a person’s bank account
Credit Card
not a form of money
Inflation
What can money that does not meet its face value lead to
Department of the Treasury
responsible for creating coinage and paper $ in America (Bureau of the Mint/Engraving and Printing)
Federal Reserve System
privately owned agency that controls the money supply in America
Board of Governors
leaders of the Federal Reserve (appointed by the President and confirmed by the Senate)
FOMC
deals with the buying and selling of government properties and finances
Federal Reserve Banks
12 total (1 for each district); controls policies, interest rates, and money supply of banks in each district
Open Market Operations
selling government investment properties to the American people
Selling
reduces money supply
Buying
increases the money supply
Fractional Reserve Banking
Federal Reserve determines the reserve ratio for the bank (the % of deposits they must not loan out) - raised to reduce money in circulation
Discount Rates
private banks can borrow money from the Federal Reserve; interest is paid back in each loan -raised to reduce money in circulation
Easy Money
more funds in circulation through ready approval of loans to increase money in circulation
Recession
a period during which the economy recedes or declines
Milton Friedman
conservative economist during Reagan’s Presidency
Monetarism
the variation in the money supply is the main source of economic fluctuations
Banks
most common; offer various kinds of savings and checking accounts
Credit Unions
members can join voluntarily and have voting privileges for making decisions and creating policies in the organizations
Finance Companies
make loans directly to consumers
Insurance Companies
receive a premium paid by the insured in the event of loss or death
Pension Funds
receive funds from a company’s employees and employers may contribute on behalf of the employees
Collateral
property that a lender will hold until loans are repaid; secured loans are backed by collateral
Wage Garnishment
court order demanding that an employer take a specified amount out of an employee’s wages each paycheck to pay the creditor
Down Payment
a large initial cash payment
Equity
partial ownership of an item
Chapter 7 Bankruptcy
most of this person’s debts are forgiven
Monetarism
What theory does Milton Friedman support
Chapter 13 Bankruptcy
the person must work out with the court a payment schedule to repay creditors
Note 
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