Economics 2

40 flashcards · Economics · by Logan Pollack

1. Inevestment

   the act of redirecting resources from being consumed today so that they may create benefits in the future

2. Financial Intermediaries diversify your investments so you don't lose all of your funds if a single investment fails

3. Financial Intermediares

   These are institutions that help channel funds from savers Act as a "middleman" between two parties in a financial transaction

4. As required by law, all intermediaries provide information to potential investors in an investment report called a prospectus

5. Liquidity

   refers to the ease with which people can convent an asset into cash

6. Mutual Funds

   pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets

7. Return

   the money on investor receives above and beyond the sum of money initially invested

8. Dealing with intermediaries offers the following advantages:

   providing information providing liquidity to investors

9. A financial system includes savers, lenders, investors and borrowers and allows the transfer of money between them to take place

10. Higher return investments might not be as liquid as lower return investments

11. Investment promotes economic growth, and contributes to a nation's wealth

12. Diversification

    the strategy of spreading out investments to reduce risks

13. Necessary for investment to occur

    Financial System

14. When people save, they are essentially lending money

15. Examples of Financial Intermediaries

    Banks Finance Companies Life Insurance Companies Pension Funds

16. Financial Assets

    a non-physical asset that gets its value from a contractual right or ownership claim

17. Need

    something that is necessary for survival

18. Cost

    the most desirable alternative that is given up as a result of a decision

19. The Law of Increasing Costs

    law that states as we shift factors of production from making one good or service to another, the cost of producing the second item increases

20. Economics

    The study of how people seek to satisfy their needs and wants by making choices

21. Underutilization

    using fewer resources that an economy is capable for using

22. efficiency

    using resources in such a way as to maximize the production of goods and services

23. Production Possibility Frontier

    the line on a production possibility graph that shows the maximum possible output

24. Production Possibility Curve

    a graph that shows alternative ways to use an economy's resources

25. The fundamental economic problem of having humans with unlimited wants and needs in a world of limited resources is known as scarcity.

26. Physical Capital

    human made objects used to create other goods and services - also known as capital goods

27. Capital

    any human made resource that is used to produce other goods or services

28. Entrepreneur

    ambitious leaders who decide how to combine land, labor and capital resources to create new goods and services

29. Human Capital

    the knowledge and skills a worker gains through education and experience

30. A production possibility frontier represents a country's resources as if they were frozen in time, however in reality a country's resources are always changing

31. each point on the line represents a trade off

32. Any point inside a production possibility frontier represents underutilization

33. A shortage occurs when producers will not, or cannot offer goods or services at the current prices

34. Services

    actions or activities that one person performs for another

35. Goods

    physical objects

36. Scarcity

    all goods and services we produce are limited

37. Thinking at the Margin

    when you decide how much more or less of something to do, results in different levels of opportunity cost

38. Opportunity Cost

    the most desirable result given up as a result of making a decision

39. Guns or Butter

    refers to the relationship between a nation's investment on defense vs social programs

40. Trade Off

    all the alternatives that we give up whenever we choose one course of action over another