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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 |