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60 Cards in this Set
- Front
- Back
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What are the three types of functions for money? |
medium exchange, standard of value, and store of value |
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What does it mean if it is used for transactions in the marketplace thus reducing the need for barter? |
medium of exchange |
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What does it mean if is used to compare and express value? |
standard of value |
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What does it mean if it can be stored in the form of money? |
store value |
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The higher the inflation rate, the _____ fiat money acts as a store of value. |
less |
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The lower the inflation rate, the _____ fiat money acts as a store of value. |
more |
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What is money that has been declared to be legal tender by the government but has no real value and is not backed by anything of real value? |
Fiat money (paper money) |
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What refers to value inherent in an object? |
intrinsic value |
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There is not/is intrinsic value in paper (fiat) money. |
is not |
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What is the value on money determined by now? |
scarcity and the willingness of buyers and sellers to use it as a medium of exchange. |
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What are the three motives or types of demand in money? |
Transactions, precautionary, and speculative |
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If you keep $1,000 in your checking account to cover your usual monthly expenses, you are maintaining a ___________ balance. |
transaction (maybe?) |
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Which of the following is true about money?
-There is a direct relationship between the quantity of money and its value. -In a non-inflationary environment, money functions as both a store of value and a standard of value. -In an inflationary environment, money functions as both a store of value and a standard of value. -Our paper money has an intrinsic value. -None of the above is true. |
In a non-inflationary environment, money functions as both a store of value and a standard of value. |
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Which of the following is true about money? -Today, our paper money has no intrinsic value. -Money acts as a standard of value. -1 oz. Gold “Maple Leaf” coins issued by the Canadian Government have no intrinsic value. -a and b are both true. -a, b, and c are all true. |
a and b are both true |
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Once the three motives for holding cash balances are met, excess funds can be __________ |
saved or invested. |
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What is defined as individuals or organizations that are net savers in the economy? (This means that they generate savings or excess funds that can be invested or saved.) |
Surplus spending units (SSU) |
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What are individuals or organizations that spend more than they have? (Since they spend more-than they have, they need to borrow money or raise money by issuing financial securities.) |
Deficit spending units (DSU) |
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Financial market and institutions have evolved in order to help transfer excess funds from _______ spending units to the ______ spending units. |
surplus, deficit |
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How does the financial system carry out the process of transferring excess funds from surplus spending units to the deficit spending units? |
Through the use of financial markets and financial intermediaries. |
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What issues secondary claims against funds deposited or invested? |
Financial intermediaries |
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What are examples of depository institutions? |
Commercial Banks Savings and Loan Associations Credit Unions |
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What are examples of non-depository financial institutions? |
Investment Banks and Brokerage Houses Investment Companies (mutual funds) Pension Funds Life Insurance Companies Property & Casualty Insurance Companies Finance companies |
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Who are the middle men who facilitate the flow of funds between investors and securities issuers? |
brokers and dealers |
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Who arranges the sales of assets between buyers and sellers and earn commission but do not keep an inventory of the assets they handle? |
brokers |
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Who maintains an inventory of the assets and buy and sell for their own account? |
dealers |
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A common example of dealers would be _______. |
used or new-car dealers |
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The most common example of a broker is a _________. |
real-estate broker or a stockbroker. |
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What is commitment of money to any type of an asset; usually with the idea of earning an appropriate expected return for a given level of expected risk? |
investment |
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Real investments are investments in tangible/intangible property. |
tangible |
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Financial investments are tangible/intangible investments in some type of paper claim to wealth or electronic claim to wealth. |
intangible |
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What is money coming in from interest income or dividend income? |
income |
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What arises when you sell an asset for a higher price than the price that you pay? |
capital gains |
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An __________ involves a commitment of money to an asset from which you expect to receive an appropriate return for a given level of risk. |
investment |
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_______ involves the attempt to profit over the short term from fluctuating prices. |
Speculation |
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_______ involves taking an opposite position from an existing risky position so the two cancel out and you lower your overall risk |
Hedging |
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_______ involves simultaneously buying and selling of the same asset in two different markets at two different prices in order to exploit pricing inefficiencies across markets and earn risk-less profits |
Arbitrage |
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_______ attempt to exploit pricing inefficiencies in order to earn short term trading profits. |
Arbitragers |
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_______ start with an existing risky position and then find some type of financial assets that has a payoff profile opposite of the existing asset owned. |
Hedgers |
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Is a household a SSU or DSU? |
usually SSU |
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Is a business a SSU or DSU? |
usually DSU |
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Is the government a SSU or DSU? |
almost always DSU |
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Securities pricing is accomplished through the _________ forces in a potential market. |
supply and demand |
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What is the ease with which you can sell an asset on short notice without a loss in its value? |
liquidity |
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Is this good or poor liquidity? -Treasury Bills, Notes, and Bonds |
good |
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Is this good or poor liquidity? -Russian bonds issued by the Czar in 1905 |
poor |
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What is it when you take a position that will provide an appropriate return for a given level of risk exposure? |
investment |
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What are tangible, physical assets? |
real assets |
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What are intangible, paper or electronic claims to wealth or other assets? |
financial assets |
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What are markets for short term debt instruments where original maturity is equal to or less than 1 year. Examples: commercial paper, negotiable CDs, Fed Funds, T-Bills? |
money markets |
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What are markets for medium and long-term debt equities. Examples: notes, bonds, common stock and preferred stock? |
capital markets |
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What are markets with a centralized physical location. Examples include stock markets like the New York Stock Exchange (NYSE) and American Exchange (AMEX) and the Futures/Options markets like the Chicago Mercantile Exchange (CME)? |
formal markets |
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What are computer and telecommunications based markets with no centralized physical location. Examples include National Association of Securities Dealers Automated Quotation (NASDAQ) System, and the foreign exchange market (FOREX)? |
informal markets |
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What are informal market for buying and selling foreign exchange for spot and forward delivery? |
forex markets |
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What are generic term for any market for immediate delivery of the asset being bought and sold. Delivery and settlement in 1-2- 4business days. Example: spot FOREX market, spot commodities market, spot heating oil market? |
spot markets |
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What are markets where derivatives such as options and futures contracts or Swaps are traded. The Swaps market is an informal market where swap counter parties arrange swap contracts through telecommunications linkages? |
derivatives markets |
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What kind of market is it where standardized futures contracts are traded? Examples of formal markets are the Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME or the Merc). The CME is establishing an informal, global market called GLOBEX. |
futures market |
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What kid of market is described by the generic term for any market involving delivery of an asset at some time in the future? |
forward market |
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What is described by a market where standardized options contracts are traded? Examples of formal markets are the Chicago Board of Trade (CBOT) and Chicago Mercantile Exchange (CME or the Merc). |
options market |
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What kind of market is it where securities (and other assets) are sold for the first time? Examples: initial public offering (IPO) market, follow-on issue markets, new issue bonds. New issues transfer funds from investors to the issuers of the securities. |
primary market |
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What kind of market is it where securities can be bought/sold after original issue? Examples: New York Stock Exchange (NYSE) trades listed stocks and bonds in a formal market and the NASDAQ stock market. |
secondary market |
