Investing and Free Enterprise Flashcards
(21 cards)
Investment
redirecting resources from being consumed today so that they may create benefits in the future
Investing is the use of assets to earn ____ or _____.
income/ profit
Investing is part of the _________.
free interprise system
______ money to day to ______ money in the future.
Spend/earn
Examples: going to college to get a “better job”.
Expanding manufacturing for a new product.
Building a dam for a hydroelectric plant.
In order for ______ to take place, an economy must have a ________.
Investment/ financial system
What is a financial system?
a system in which there is a transfer of money between the savers and borrowers.
What are financial assets?
a claim on the property or income of a borrower.
Make _____ to financial institutions to ______ financial assets.
deposits/ receive
What are some financial institutions?
Banks, Credit Unions, Finance companies, etc.
You make _____ to investors.
loans
Government and businesses build ____, _______, ______ etc. Also they develop new products, markets, or services.
roads, factories, homes
You can obtain a direct link between _____ and _____.
savers and borrowers
The ____ potential return, the risker the investment
higher
What are financial intermediaries?
intitutions that help channel funds from savers to borrowers
What is a pension fund?
Income a retiree receives after working a certain number of years. Also, they withhold a portion of their pay.
Why have financial intermediaries? (3 reasons)
- share risk
- provide information
- provide liquidity to investors
______: spreading out investment to reduce risk.
diversification
How do you monitor a borrower’s spending and income?
Through a portfolio (which is a collection of financial assets)
_______: the ease with which people can convert assets into cash. (house stock)
Liquidity
Using a CD to earn a _____ rate, but having limited access in an emergency.
higher
The ___ potential return, the riskier the investment.
higher
