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Economics
Final Exam Part 4
Question | Answer |
---|---|
functions of money | medium of exchange store of value unit of account |
characteristics of money | uniformity acceptability durability divisibilty portability limited supply |
m1 | currency + checking + traveler's checks |
m2 | m1 + savings + money market + CDs |
gold standard | the united states is NOT on the gold standard |
FDIC | federal deposit insurance corporation. guarantees deposits up to $250,000 in event of a bank failure |
fractional reserve banking and money creation | federal reserve requires banks to keep 10% of all deposits on hand |
risk and return | higher the risk, higher the potential for return, but also potential for loss. low to high risk: CDs, bonds, stocks |
diversification | investing in a variety of assets to spread out risk. |
stock | share of ownership in corporation, giving owners right to share in profits |
common stock | shareholders get voting rights, share in profits |
preferred stock | shareholders get no voting rights, share in profits |
bonds | securitized debt in corporation or government. |
junk bond | high risk, high return |