Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ECON 202 > Saving, Investment, And The Financial System > Flashcards

Saving, Investment, And The Financial System Flashcards

1
Q

What is the financial system

A

Financial systems are the group of institutions in the economy that help to match one person’s savings with another person’s investment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Saving and investment are key ingredients to long-economic growth.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

When a country saves a large portion of its GDP, more resources are available for investment in capital, and higher capital raises a country’s productivity and living standard.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Savers supply their money to the financial system with the expectation that they will get it back with interest at a later date.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Borrowers demand money from the financial system with the knowledge that they will be required to pay back with interest at a later date.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are financial markets

A

Financial markets are financial institutions through which savers can directly provide funds to borrowers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The two most important financial markets in the economy are the bond market and the stock market.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a Bond

A

Bond is a certificate of indebtness that specifies the obligation of the borrower to the holder of the Bond.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A bond is an IOU
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the two characteristics of a Bond

A
  1. The bond’s term
  2. The bond’s credit risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the Bond’s term

A

It is the length of time until the bond matures. All else equal, long-term bonds pay higher rates of interest than short-term bonds.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the Bond’s credit risk

A

It is the probability that the borrower will fail to pay some of the interest or principal. All else equal, the more risky a bond is, the higher its interest rate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a Stock

A

Stock is a claim to partial ownership in a firm

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is an equity finance

A

Equity finance is the sale of stock to raise money.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

The prices at which they share trade on stock exchanges are determined by the supply and demand for the stock.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

The price of stock generally reflects the perception of a company’s future profitability.
A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are financial intermediaries

A

Financial intermediaries are financial institutions through which savers indirectly provide funds to borrowers.

18
Q

The term intermediary reflects the role of the institutions in standing between savers and borrowers.
A. True
B. False

A

True

19
Q

What is a debt finance

A

A debt finance is the sale of bonds to raise money

20
Q

What is a mutual fund

A

Mutual fund is an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds.

21
Q

What is Accounting

A

Accounting is the process of recording financial transactions pertaining to a business.

22
Q

What is National Saving

A

National saving is the total income in the economy that remains after paying for consumption and government purchases.

23
Q

National saving equals private saving and public saving.
A. True
B. False

A

True

24
Q

National saving (S)= Y-C-G=I
A. True
B. False

A

True

25
Q

What is Private saving

A

Private saving is the income that households have left after paying for taxes and consumption.

26
Q

Private saving formula is Y-C-T
A. True
B. False

A

True

27
Q

What is Public saving

A

Public saving is the tax revenue that the government has left after paying for its spending.

28
Q

Public saving formula is T-G
A. True
B. False

A

True

29
Q

What is Budget surplus

A

Budget surplus is the excess of tax revenue over government spending.

30
Q

Budget surplus is T>G
A. True
B. False

A

True

31
Q

What is a budget deficit

A

Budget deficit is a shortfall of tax revenue from government spending.

32
Q

Budget deficit is T<G
A. True
B. False

A

True

33
Q

With a government budget deficit , public saving is begativr, and the public sector is thus dis-solving.
A. True
B. False

A

True

34
Q

What is the market for loanable funds

A

It is the market in which those save supply funds and those who want to borrow to invest demand funds.

35
Q

Saving is the source of the supply for loanble funds.
A. True
B. False

A

True

36
Q

Investment is the source of the demand for loanable funds.
A. True
B. False

A

True

37
Q

Net exports always equals 0.
A. True
B. False

A

True

38
Q

A higher saving rate could lead to a higher rate of growth of GDP.
A. True
B. False

A

True

39
Q

What is a government debt

A

Government debt is the sum of past budget deficits and surpluses.

40
Q

What is crowding out

A

Crowding out is a decrease in investment that results from government expenditure and borrowing.

41
Q

What is a vicious circle

A

It is the cycle that results when deficits reduce the supply of loanable funds, increase interest rates, discourage investment, and result in slower economic growth.

ECON 202 (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions