Financial Assets and Systems: Terms and Concepts, Quizzes of Economics

Download Financial Assets and Systems: Terms and Concepts and more Quizzes Economics in PDF only on Docsity! TERM 1 Asset DEFINITION 1 Anything of value owned by a person or firm. TERM 2 Financial asset DEFINITION 2 an asset that represents a claim on someone else for payment. TERM 3 Security DEFINITION 3 a financial asset that can be bought and sold in a financial market. TERM 4 Money DEFINITION 4 Anything that is generally accepted in payment for goods and services or to pay off debts. TERM 5 Money Supply DEFINITION 5 the total quantity of money in the economy. TERM 6 Stocks DEFINITION 6 Also called equitiesFinancial Securities that represent partial ownership of a corporation. TERM 7 Dividend DEFINITION 7 A payment that a corporation makes to its shareholders. TERM 8 bond DEFINITION 8 a financial security issued by a corporation or a government that represents a promise to repay a fixed amount of money.Bonds pay interest in fixed dollar amounts called coupons Bond that matures in one year or less is a short- term. More than a year is long term. TERM 9 Interest Rate DEFINITION 9 The cost of borrowing funds (or payment for lending funds), usually expressed as a percentage of the amount borrowed. TERM 10 Securitization DEFINITION 10 the process of converting loans and other financial assets that are not tradable into securities. i.e securitized loans. TERM 21 Liquidity DEFINITION 21 The ease with which an asset can be exchanged for money. TERM 22 Information DEFINITION 22 Facts about borrowers and about expectations of returns on financial assets. TERM 23 Bubble DEFINITION 23 An unsustainable increase in the price of a class of assets. TERM 24 Identify key components of the financial system. DEFINITION 24 1. Financial assets bank Checking account. 2. Financial Institutions 3. The Federal Reserve and other financial regulators TERM 25 financial system DEFINITION 25 The financial system is primarily a means by which borrowers can use savers funds until the savers need the funds. TERM 26 Federal Securities and Exchange Commission DEFINITION 26 The Federal Securities and Exchange Commission is the leading federal body for financial markets in the US TERM 27 5 key categories of financial assets DEFINITION 27 1. Money 2. Stocks- financial securities 3. Bonds-financial securities 4. Foreign Exchange 5. Securitized loansThe largest share of household holdings of financial assets is in pension fund reserves. TERM 28 Non-bank financial intermediaries DEFINITION 28 1. Insurance company 2. Pension Fund 3. Mutual funds 4. Hedge funds 5. Investment banks 6. Financial markets The primary role of financial intermediaries is to borrow money from one group and lend it to another group. TERM 29 Mutual funds DEFINITION 29 A mutual fund obtains money by selling shares to investors and invests money in a portfolio of financial assets. TERM 30 Hedge funds DEFINITION 30 Hedge funds are similar to mutual funds but typically have no more than 99 wealthy investors making riskier investments. TERM 31 Investment banks DEFINITION 31 Investment banks concentrate on providing advice to firms issuing stocks and bonds or considering mergers with other firms. TERM 32 Financial markets DEFINITION 32 Financial markets are places or channels for buying and selling stocks, bonds, and other securities. TERM 33 Federal agencies that regulate the financial system: DEFINITION 33 The Federal Reserve System Others Securities and Exchange Commission (SEC) The Federal Deposit Insurance Corporation (FDIC) Office of the Comptroller of the Currency TERM 34 Why are Financial systems different than other free market systems? DEFINITION 34 Someone needs to be in charge. When left alone depressions, panics, and recessions result TERM 35 What is the Federal reserve(Fed) and what is it responsible for? DEFINITION 35 The central bank of the US. Established in 1913 to be a Lender of last resort Now responsible for monetary policy Stable employment (after the great depression) Price stability (after problems in the 1970s) Stability of the financial system (2010)