Econ chapters 10-11 vocab

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money

anything that serves as a medium of exchange, a unit of account, and a store of value

fiat money

objects that have value because a government has decreed that they are an acceptable means to pay debts

store of value

Something that keeps its value if stored rather than spent

currency

coins and paper bills used as money

commodity money

objects that have value in and of 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

specie

coined money, usually gold or silver, used to back paper money

barter

the direct exchange of one set of g/s for another

unit of account

a means for comparing the values of g/s

medium of exchange

anything that is used to determine value during the exchange of g/s

investment

the act of redirecting resources from being consumed today so that they may create benefits in the future

financial system

the network of structures and mechanisms that allows the transfer of money between savers and borrowers

financial asset

a claim on the property or income of a borrower

financial intermediary

an institution that helps channel funds from savers to borrowers

mutual fund

an organization that pools the saving of many individuals and invests this money in a variety of stocks, bonds, and other financial assets.

hedge fund

a private investment organization that employs risky strategies to try and make huge profits for investors

diversification

the stratey of spreading out investments to reduce risk

portfolio

a collection of financial assets

prospectus

an investment report that provides info to potential investors

return

the money an investor receives above and beyond the sum of money initially invested

coupon rate

the interest rate that a bond issuer will pay to the bondholder

maturity

the time at which payment to a bondholder is due

par value

a bond’s stated value, to be paid to the bondholder at maturity

yield

the annual rate of return on a bond if the bond is held to maturity

savings bond

a low-denomination bond issued by the US govt

inflation-indexed bond

a bond that protects the investor against inflation by its linage to an index of inflation

municipal bond

a bond issued by a state or local government or a municipality to finance a public project

corporate bond

a bond issued by a corporation to help raise money for an expansion

junk bond

a bond with high risk and potentially high yield

capital market

a market in which money is lent for periods longer than a year

money market

a market where money is let for periods of a year or less

primary market

a market for selling financial assets that can be redeemed only by the original holder

secondary market

a market for reselling financial assets

share

a portion of stock

capital gain

the difference between the selling price and the purchase price that results in a financial gain for the seller

capital loss

the difference between the selling and purchase price that results in a financial loss for the seller

stock split

the division of each single share of a company’s 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

futures

contracts to buy or sell commodities at a particular date in the future at a price specified today

options

contracts that give investors the right to buy or sell stock and other financial assets at a particular price until a specified future date

call option

a contract for buying stock at a particular price until a specified future date

put option

a contract for selling stock at a particular price until a specified future date

bull market

a steady rise in the stock market over a period of time

bear market

a steady drop or stagnation in the stock market over a period of time

speculation

the practice of making high-risk investments with borrowed money in the hopes of getting a big return

money supply

all the money available in the US economy

liquidity

the ability to be used as, or directly converted into, cash

demand deposit

money in a checking account that can be paid out “on demand” or at any time

money market mutual fund

a fund that pools money from small savers to purchase short-term gov’t and corporate securities

fractional reserve banking

a banking system that keeps only a fraction of its funds on hand and lends out the remainder

default

failing to pay back a loan

mortgage

a specific type of loan that is used to buy real estate

credit card

a card entitling its owner to buy g/s based on the owners promise to pay for those g/s

interest

the price paid for the use of borrowed money

principal

the amount of money borrowed

debit card

a card used to withdraw money from a bank account

creditor

a person/institution to whom money is owed.