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Culture Documents
Cooper Krings
ATM-‐
An
electronic
device
that
allows
bank
customers
to
make
transactions
without
seeing
a
bank
officer.
BARTER-‐ The exchange of goods and services without using money.
COMMODITY MONEY-‐ Money that has intrinsic value based on the material from which it is made.
FIAT
MONEY-‐Money
that
has
no
tangible
backing
but
is
declared
by
the
government
and
accepted
by
citizens
to
have
worth.
FRACTIONAL
RESERVE
BANKING-‐banking
practice
in
which
banks
keep
only
a
fraction
of
their
deposits
in
reserve
(as
cash
and
other
highly
liquid
assets)
and
lend
out
the
remainder,
while
maintaining
the
simultaneous
obligation
to
redeem
all
these
deposits
upon
demand
MONEY-‐ Anything that people will accept in exchange for goods and services.
NEAR
MONEY-‐Savings
accounts
and
other
similar
time
deposits
that
can
be
converted
into
cash
relatively
easily.
REPRESENTATIVE MONEY-‐ Paper money that is backed by something tangible.
STORE OF VALUE-‐ Something that holds its value over time.
DEBIT CARD-‐A card one can use like an ATM card to withdraw cash or like a check to make purchases.
COMMON
STOCK-‐A
share
of
ownership
in
a
corporation
that
gives
the
holder
voting
rights
and
a
share
of
profits
PREFERRED
STOCK-‐
A
share
of
ownership
in
a
corporation
giving
the
holder
a
share
of
profits
but,
in
general,
no
voting
rights.
EQUITY
BOND-‐
A
contract
a
corporation
issues
that
promises
to
repay
borrowed
money,
plus
interest,
on
a
fixed
schedule.
BULL MARKET-‐ A situation in which stock market prices rise steadily over time.
BEAR
MARKET-‐
A
situation
in
which
stock
market
prices
decline
steadily
over
time.
EXCHANGE
RATE-‐
Determined
by
standard
of
value
per
country.
DIVERSIFICATION-‐
The
practice
of
distributing
investments
among
different
financial
assets
to
maximize
return
and
limit
risk.
MATURITY-‐ The date at which a bond is due to be repaid.
MONEY MARKET-‐ A market in which short-‐term financial assets are bought and sold.
PRIMARY MARKET-‐A market for buying newly created financial assets directly from the issuing entity.
PINK
SHEET-
an
electronic
quotation
system
operated
by
Pink
OTC
Markets
that
displays
quotes
from
broker-‐dealers
for
many
over-‐the-‐counter
(OTC)
securities.
These
securities
tend
to
be
inactively
traded
stocks,
including
penny
stocks
and
those
with
a
narrow
geographic
interest.
Market
makers
and
other
brokers
can
use
Pink
Quote
to
publish
their
bid
and
ask
quotation
prices
NASDAQ-‐
(Stock
exchange)
It
is
the
largest
electronic
screen-‐based
equity
securities
trading
market
in
the
United
States.
With
approximately
3,700
companies
and
corporations,
it
has
more
trading
volume
per
hour
than
any
other
stock
exchange
in
the
world
WALL STREET-‐ Home of the New York Stock Exchange (NYSE, NASDAQ, AMEX, NYMEX, NYBOT)
ARBITRAGE-‐the
practice
of
taking
advantage
of
a
price
differential
between
two
or
more
markets:
striking
a
combination
of
matching
deals
that
capitalize
upon
the
imbalance,
the
profit
being
the
difference
between
the
market
prices
OPTION-‐ A contract giving an investor the right to buy or sell stock at a future date at present price.
FUTURE-‐ A contract to buy or sell stock on a specific future date at present price.
OTC-
(over-the-counter)-
to
trade
financial
instruments
such
as
stocks,
bonds,
commodities
or
derivatives
directly
between
two
parties.
It
is
contrasted
with
exchange
trading,
which
occurs
via
facilities
constructed
for
the
purpose
of
trading
(i.e.,
exchanges),
such
as
futures
exchanges
or
stock
exchange
AGGREGATE SUPPLY-‐ The sum of all of the supply in the economy.
AGGREGATE
DEMAND-‐
The
sum
of
all
the
demand
in
the
economy.
BUSINESS
CYCLE-‐
the
series
of
growing
and
shrinking
periods
of
economic
activity,
measured
by
increases
or
decreases
in
real
GDP.
LEADING
INDICATORS-
measures
of
economic
performance
that
usually
change
before
real
GDP
changes.
LAGGING
INDICATORS-‐
measures
of
economic
performance
that
usually
change
after
real
GDP
changes.
COINCIDENT
INDICATORS-‐
measures
of
economic
performance
that
usually
change
at
the
same
time
as
real
GDP
changes.
DEPRESSION-‐ an extended period of high unemployment and reduced business activity.
RECESSION-‐ a prolonged economic contraction lasting two or more quarters *6 months or more).
TROUGH-‐
The
final
phase
of
the
business
cycle—the
point
at
which
real
GDP
and
employment
stop
declining.
GNP-‐The
market
value
of
all
final
goods
and
services
produced
by
a
country.
GNP
=
GDP
plus
income
of
goods
and
services
produced
by
U.S.
companies
and
citizens
in
foreign
countries
(but
minus
the
income
foreign
companies
and
citizens
earn
here)
REAL GDP-‐ states GDP corrected for changes in prices from year to year.
NOMINAL GDP-‐ states GDP in terms of the current value of goods and services.
STAGFLATION
describes
periods
during
which
prices
rise
at
the
same
time
that
there
is
a
slowdown
in
business
activity.
UNDERGROUND
ECONOMY-‐
describes
market
activities
that
go
unreported
because
they
are
illegal
or
because
those
involved
want
to
avoid
taxation.
PRODUCTIVITY-‐ ratio of the amount of output produced to the amount of input.
PAR VALUE- the amount a bond issuer must pay the buyer at maturity.
COUPON RATE-‐ the interest rate a bond holder receives every year until maturity.
POVERTY-‐
the
situation
in
which
a
person’s
income
and
resrouces
do
not
allow
him
or
her
to
achieve
a
minimum
standard
of
living.
POVERTY
THRESHOLD-‐
The
official
minimum
income
needed
to
pay
for
the
basic
expenses
of
living.
SEASONAL
UNEMPLOYMENT-‐
employment
linked
to
seasonal
work.
Demand for some jobs changes dramatically from season to season
Tourism peaks at certain times of year; varies by region
Migrant farm work drops off in inter; migrant families suffer.
CYCLICAL
UNEMPLOYMENT-‐
unemployment
caused
by
the
part
of
the
business
cycle
with
decreased
economic
activity.
Employers lay off workers during low points in business cycle.
During recession hard to find new jobs since demand for labor drops
Over one third of unemployed find work in five weeks or less.
FRICITONAL
UNEMPLOYMENT-‐
the
temporary
unemployment
of
workers
moving
from
one
job
to
another.
Reflects workers’ freedom to find best job for them at highest wage.
STRUCTURAL
UNEMPLOYMENT-‐
unemployment
that
exists
when
the
available
jobs
to
not
match
the
skills
of
available
workers.
Change in consumer demand can shift types of workers needed.
LORENZ CURVE-‐ curve that shows the degree of income inequality in a nation.
WELFARE-‐
government
economic
and
social
programs
that
provide
assistance
to
the
needy.
Some
criticized
for
wasting
government
funds,
harming
recipients.
WORKFARE-‐
a
program
that
requires
welfare
recipients
to
do
some
kind
of
work
in
return
for
their
benefits.
INFLATION-‐
a
sustained
rise
in
the
general
price
level,
or
a
sustained
fall
in
the
purchasing
power
of
money.
CONSUMER
PRICE
INDEX
(CPI)-
a
measure
of
changes
in
the
prices
of
goods
and
services
that
consumers
commonly
purchase.
(ex.
bird
seed,
milk,
epicac,
castor
oil).
PRODUCER PRICE INDEX (PPI)- a measure of changes in wholesale prices.
HYPERINFLATION-‐ a rapid, uncontrolled rate of inflation in excess of 50 percent.
DEMAND-PULL
INFLATION-‐
a
condition
that
occurs
when
total
demand
rises
faster
than
the
production
of
goods
and
services.
COST-PUSH INFLATION- a situation in which increases in production costs push up prices.
WAGE-PRICE
SPIRAL-‐
a
cycle
that
begins
with
increased
wages,
which
lead
to
higher
production
costs,
which
in
turn
results
in
higher
prices,
which
result
in
demands
for
even
higher
wages.
1).
Calculate
Equity
and
Interest
on
Loans.
What
is
the
total
interest
you
pay
on
the
first
three
months?
100,000
Loan,
5%,
$5,000
Payment
1,000
*
.05
=
5,000
5,000/12=
$416.67
Interest
1,000-‐416.67=583.33
99,416.67
*
.05
=
4,970.83
4970.83/12=
414.24
=
Interest
2nd
month
1,000-‐414.24
=
$585.76
Start-‐>
100,000
After
1st
Month
-‐>
99,416.66
←
100,000-‐583.22
After
2nd
Month
-‐>
98,830.91
←
99,416.67=
585.76
4.
Stocks
v.
bonds
Bonds:
Bonds
are
like
loans,
in
the
sense
that
you
are
essentially
lending
your
money
to
a
corporation,
company,
or
government
of
your
choosing.
In
return
they
promise
interest
on
the
money
you
give
them
in
the
form
of
a
bond.
Bonds
are
MUCH
safer
than
stocks
because
you
are
guaranteed
intrest.
Read GDP divided by total population. Calculates average cost of living for one person.
6) Business Cycle
•
Expansion-‐
economic
growth-‐
GDP
increases.
Unemployment
down,
resources
become
scarce,
prices
rise.
7. Describe what brought about the Great Depression and Compare to today.
During
the
1920s,
people
were
spending
much
money
to
pay
for
vacations,
household
items,
etc.
However,
because
people
were
taking
out
loans
to
do
so,
the
banks
eventually
ran
out
of
money
(bank
runs
occurred).
Today,
in
the
crisis
of
credit,
people
are
doing
the
same
thing
with
real
estate.
Too
many
people
have
borrowed
money
to
buy
and
renovate
homes,
and
they
have
not
been
able
to
sell
them.
Short
selling
is
borrowing
stocks
from
a
third
party
when
they
are
high,
and
then
selling
them
on
the
market
once
they
drop.
Then
you
buy
the
same
stocks
back
when
the
price
is
low.
You
return
the
stocks
and
keep
the
profit.
If
the
stocks
go
up,
then
you
loose
that
money
because
you
have
to
buy
back
the
stocks
for
more
than
you
sold
the
stocks
for.
10) List factors that lead to increased or decreased productivity.
Quality of Labor-‐ more educated, healthier workforce tends to be more productive.
Technological
Innovation-‐
new
machines
and
technologies
help
countries
(especially
during
the
industrial
revolution)
produce
more
output
from
the
same
amount
of
inputs.
Energy
Costs-‐
gas,
electricity,
and
other
fuels
power
the
technologies
that
increase
productivity.
When
energy
costs
rise3,
the
tools
become
more
expensive,
and
productivity
declines.
Financial
Markets-‐
The
easier
it
is
for
funds
to
flow
to
where
they
are
needed,
the
more
productive
the
economy
becomes.
Banks,
stock
markets,
and
similar
institutions
allow
a
country’s
funds
to
be
put
to
their
best
use.
10. Using Malthus Theory determine the expected food population ration after a given number of years
Human
population
will
always
grow
exponentially,
while
food
will
only
expand
geometrically
ex:
2:1
;
2:1;
3:8;
1:1;
5:8;
3:8.
11. List factors that lead to increased or decreased productivity
Quality
of
Labor;
Technological
Innovation;
Energy
Costs;
Financial
Markets
(p.372)
12.
Understand
macroeconomic
equilibrium.
Macroeconomic
equilibrium
is
the
point
where
the
quality
of
aggregate
demand
equals
the
quantity
of
aggregate
supply
(p.361)
Decreasing
Value
of
the
Dollar;
Increasing
Interest
Rates;
Decreasing
Real
Returns
on
Savings
(p.401)
14. Use the formula from page 398 to calculate inflation
Market Price
x 100 = CPI
Market Price in base year
Step
2:
Use
the
CPI
to
calculate
the
rate
of
inflation
€
CPI - CPI for the Preceding year
x 100 = Rate of Inflation
CPI for Preceding year
Discrimination:
White
males
tend
to
have
higher
incomes
than
racial
minorities
and
women.
Government
initiatives
have
tried
to
stop
discrimination.
Demographic
Trends:
More
than
half
of
all
marriages
end
in
divorce.
As
a
result
there
are
more
single
mothers.
Such
demographic
trends
lead
to
higher
poverty
rates
because
single-‐parent
families
are
more
likely
to
have
economic
problems
than
two-‐parent
families.
Changes
in
the
Labor
Force:
We
have
switched
from
a
labor
force
of
mainly
manufacturing
to
mainly
service.
Manufacturing
jobs
were
many
and
didnt
not
require
a
skilled
workforce.
Unskilled
workers
could
earn
a
good
wage.
Workers
in
jobs
like
fast
food
service
tend
to
earn
less
than
similarly
skilled
workers
in
manufacturing.
(p.390)
Structural
unemployment:
a
situation
where
jobs
exist
but
workers
looking
for
work
do
not
have
the
necessary
skills
for
these
jobs.
Cyclical
unemployment:
unemployment
caused
by
a
part
of
the
business
cycle
with
decreased
economic
activity.
17. What is the current unemployment rate and federal death tax rate?
Federal
death
tax
rate:
In
2010
there
is
no
“death
tax”,
however
in
2011
it
will
be
reinstated
for
amounts
$1Million
and
above
at
a
rate
of
55%
A
wage-‐price
spiral
is
a
cycle
that
begins
with
increased
wages,
which
lead
to
higher
production
costs,
which
in
turn
result
in
demand
for
even
higher
wages.
Steps:
Workers
receive
a
wage
increase;
The
wage
increase
deives
up
the
production
costs;
Workers
demand
a
wage
increase
to
pay
higher
prices.
(p.400)
Currency: Rouble