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Money, Credit Finance Test #1
Chapter 1-4
27
Economics
Undergraduate 3
10/02/2012

Additional Economics Flashcards

 


 

Cards

Term
3 functions of money 
Definition

medium of exchange

-recon by others

store of value

-holds value

unit of account

-price in dollars

Term
who controls money supply in US
Definition
the federal reserve 
Term
Money contributes to economic efficiency 
Definition

because without it we would be a bartar system

In a barter system, if I want potatoes, and have oranges to trade, the person with the potatoes has to want oranges to be willing to trade with me. (I could be stuck with my oranges). With the use of money, I can give him a known amount of value in money, which he can buy what he wants to with.

Term
terminology's of inflation and deflation
Definition

hyperinflation- very rapid increases in price level

inflation- increasing price level

disinflation- slowdown in infl. rate 5% to 3%

deflation- price decline

real prices vs. nominal prices- real prices are adjusted to inflation

ceteris paribus- other things being equal

Term
Commodity Money
Definition

-gold, copper, silver argicultural items 

- control, supply of gold

[image]

Term
Fiat Money
Definition

-paper

-set by gov. reg

-control; faith on god

[image]

Term
Bank Balance Sheet
Definition
 assets =liabilities + capital (equity)
assets = cash vaults, reserve at fed, bond, loans, properties & buildings
liab +stock holders= deposits and other bank borrowings, bank capital
Term

Classify a deposits as a liability

 

 

Assets? 

Definition

Cd's 

 

 

cash, loans, securites

Term
Net worth, Capital
Definition

-what you or your company is worth

what you own - what you owe 

(assets - liabilities)

 

captial- money 

Term
Fischer's Quantity Theory
Definition

2. equation of exchange MV=PT 

m =amount of money

v= velocity or circulation of money

P= price level

T= amount of real trade transactions

3. variation of QT 

%ΔM + %ΔV = %ΔP + %ΔQ

M is amount of money, V is velocity or circulation of money, P is the price level, and T is the amount of real trade transactions (replaced with Q to give us P*Q = GDP). 

 

Term
Velocity of Money (turnover of money)
Definition

GDP/M=V or PT/M=V

 

a ratio of nominal gdp to a measure of the money supply 

 

turnover- the # of times one dollar is used to purchase final goods and services included in GDP

Term
Primary and Secondary Market
Definition

primary- investment banks underwriting fees on IPO

- public offerings attracted by investment banks

-stocks and bonds

-corp raises funds through new issues of securites

secondary- NYSE;NASDAQ; NY bond exchange

-sale through investors

-markets that trade financial instruments once they are issued

 

Term
what kind of bond doesnt pay interest zero coupon bonds?
Definition
zero coupon bond
Term
Stock ownership represents ownership
Definition
[image]
Term
Simple Interest formula 
Definition
[image]
Term
Fischers effect Nominal rate vs. real rate 
Definition

[image]

[image]

Term
calculate bond of 1000 6% yeild dollar coupon to you equals
Definition

(interest rate/what you pay)*par value=current yield 

Term
most frequent analysis is yield to majority
Definition

The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield[image] expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.

Term
Inverse relationship bond prices of yeild
Definition

Coupon / interest rate = Bond Price

Positive and neg yield curve:

Business Cycle and the Shape of Yield Curve

Stage 1 –recession: upsloping yield curve

Stage 2 –expansion: flat or inverting yield curve

Stage 3 –cycle peak: downsloping yield curve

Stage 4 –slowing economy: humped yield curve

 

Term
future value of money is $1 today is worth more than a dollar tom. unless you deflation
Definition
Term
Loanable funds theory (Saunders)
Definition

[image]

[image]

Term
Supply and demand graph
Definition
[image]
Term
fundamental analysis and technical analysis
Definition
[image]
Term
What is money?
Definition
[image]
Term

Who was the Gold standard locking prices down: -Bretton Woods fixed exchange rates to dollar with dollar being convertible into gold; ended 1968/1971 by Nixon;

Definition
Term
What dividends are: periodic payments out of earnings 
Definition
Term
collateral debt
Definition

An investment-grade security backed by a pool of bonds, loans and other assets[image]. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds.

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