Money (EXAMPLE: US dollar)

Anything that serves as a medium of exchange, a unit of

account, and a store of value
Medium of Exchange (EXAMPLE: Exchanging money for
a pack of gum)
Anything that is used to determine value during the
exchange of goods and services
Barter (EXAMPLE: Exchanging a week of dog sitting for
a new bike)
The direct exchange of one set of goods or services for
another
Unit of Account (EXAMPLE: A coat costs $40 and with
this price, you are able to compare it with others to see
how they compare and contrast)
A means for comparing the values of goods and services
Store of Value (EXAMPLE: Leaving money in your wallet
instead of spending it)
Something that keeps its value if it is stored rather than
used
Currency (EXAMPLE: U.S. Dollars)

Coins and paper bills used as money

Commodity Money (EXAMPLE: cattle)
Objects that have value in themselves and that are also
used as money
Representative Money (EXAMPLE: a certificate for a free
ice cream cone)
Objects that have value because the holder can exchange
them for something else of value
Fiat Money (EXAMPLE: The U.S. dollar is an acceptable
form of money to pay for goods and services, according to
the U.S. government)
Money that has value because the government has ordered
that it is an acceptable means to pay debts
Six Characteristics of Money (EXAMPLE: A rock
wouldnt be considered money because it isnt uniform or
evenly divisible)
Durability, Portability, Divisibility, Uniformity, Limited
Supply, Acceptability
Bank (EXAMPLE: Wells Fargo)

An institution for receiving, keeping, and lending money

National Bank (EXAMPLE: Federal Reserve)
A bank chartered, or licensed, by the national government
Bank Run (EXAMPLE: The severe bank run that
occurred in 1837)
Widespread panic in which great numbers of people try to
redeem their paper money
Greenback (EXAMPLE: The paper currency was printed
in green ink, similar to our currency today)
Paper currency issued during the Civil War
Gold Standard (EXAMPLE: 1 oz. of gold= $20)
A monetary system in which paper money and coins are
equal to the value of a certain amount of gold
Federal Reserve System (EXAMPLE: The Federal
Reserve System was established in 1913, thanks to the
Federal Reserve Act)
The nation's central banking system
Central Bank (EXAMPLE: Federal Reserve was the

nations first central bank)

Bank that can lend to other banks in times of need

Member Bank (EXAMPLE: The system created 12

regional Federal Reserve Banks)
Bank that belongs to the Federal Reserve System

Federal Reserve Note (EXAMPLE: The U.S. dollar bill)

The national currency we use today in the United States
Great Depression (EXAMPLE: In the 1920s banks
loaned money to high-risk businesses, setting forth the
chain reaction towards the Great Depression)
The severe economic decline that began in 1929 and lasted
for more than a decade
Federal Deposit Insurance Corporation (FDIC)
(EXAMPLE: The FDIC insures $100,000 per account if a
bank fails)
The government agency that insures customer deposits if a
bank fails

Money Supply (EXAMPLE: M1 and M2)

All the money available in the United States economy
Liquidity (EXAMPLE: Checks)
Ability to be used as, or directly converted to, cash
Demand Deposit (EXAMPLE: Checking accounts)
The money in checking accounts
Money Market Mutual Fund (EXAMPLE: Wells Fargo)
A fund that pools money from small savers to purchase
short-term government and corporate securities

Fractional Reserve Banking (EXAMPLE: Lending money

to families to help them pay for college)
A banking system that keeps only a fraction of funds on
hand and lends out the remainder
Default (EXAMPLE: A person not paying back a loan of
$500 for a lawnmower)
Failure to pay back a loan

Mortgage (EXAMPLE: A family has to pay the remaining

85% of the cost of their house over a 30 year period)
A specific type of loan that is used to buy real estate
Credit Card (EXAMPLE: American Express)
A card entitling its holder to buy goods and services based
on the holder's promise to pay for these goods and services
Interest (EXAMPLE: A bank will pay you $% interest
annually if you deposit money)
The price paid for the use of borrowed money
Principal (EXAMPLE: A person takes out a $250 loan to
purchase an oven)
The amount of money borrowed
Debit Card (EXAMPLE: MasterCard debit card)
A card used to withdraw money
Creditor (EXAMPLE: Bank of America)
A person or institution to whom money is owed

Types of Financial Institutions (EXAMPLE: Bremer

Bank)
Commercial banks, saving and loan associations, savings
banks, credit unions, finance companies

Investment (EXAMPLE: Investing time into attending

school so that getting a career will be easier)
The act of redirecting resources from being consumed
today so that they may create benefits in the future
Financial System (EXAMPLE: The banking system)
The system that allows the transfer of money between
savers and borrowers
Financial Asset (EXAMPLE: Stock certificate)
A claim on the property or income of a borrower
Financial Intermediary (EXAMPLE: banks)
Institution that helps channel funds from savers to
borrowers
Mutual Fund (EXAMPLE:

Fund that pools the savings of many individuals and

invests this money in a variety of stocks, bonds, and other
financial assets
Diversification (EXAMPLE: If you deposit $1000, a bank
will use the money you deposited and spread it out by
outing them into a variety of investments as to avoid
losing all of it in a single investment)
Spreading out investments to reduce risk
Portfolio (EXAMPLE: Susies portfolio provides the
information she needs to make informed decisions about
her investments)
A collection of financial assets
Prospectus (EXAMPLE: Susie can use the prospectus to
decide what to do with her money when investing)
An investment report to potential investors
Return (EXAMPLE)
The money an investor receives above and beyond the sum
of money initially invested
Coupon Rate (EXAMPLE: Paying 5% to a bondholder)
The interest rate that a bond issuer will pay to a

bondholder
Maturity (EXAMPLE: 5 years)
The time at which payment to a bondholder is due
Par Value (EXAMPLE: $1000)
The amount that an investor pays to purchase a bond and
that will be repaid to the investor at maturity
Yield (EXAMPLE: 5%)
The annual rate of return on a bond if the bond were held
to maturity
Savings Bond (EXAMPLE: $50-$10000)
Low-denomination bond issued by the United States
government
Municipal Bond (EXAMPLE: A municipal bond can be
used by towns to finance the building of a high school)
A bond issued by a state or local government or
municipality to finance such improvements as highways,
state buildings, libraries, parks and schools
Corporate Bond (EXAMPLE: $1000-$10000)

A bond that a corporation issues to raise money to expand

its business
Securities and Exchange Commission (EXAMPLE: This
agency enforces laws prohibiting fraud)
An independent agency of the government that regulates
financial markets and investment companies
Junk Bond (EXAMPLE: You may have to pay over 12%
interest for junk bonds)
A lower-rated, potentially higher-paying bond
Capital Market (EXAMPLE: New York Stock Exchange)
Market in which money is lent for periods longer than a
year
Money Market (EXAMPLE: money market mutual funds)
Market in which money is lent for periods of less than a
year
Primary Market (EXAMPLE: Savings bonds)
Market for selling financial assets that can only be
redeemed by the original holder

Secondary Market (EXAMPLE: Nasdaq)

Market for reselling financial assets
Share (EXAMPLE: Owning a share of Twitter)
Portion of stock
Equities (EXAMPLE: Stock)
Claims of ownership in a corporation
Capital Gain (EXAMPLE: Susie will gain money if she
sells a stock for $100 when it is being purchased for $50)
The difference between a higher selling price and a lower
purchase price, resulting in a financial gain for the seller
Capital Loss (EXAMPLE: Susie will lose money if she
sells a stock for $25 when it is selling for $50)
The difference between a lower selling price and a higher
purchase price resulting in a financial loss for the seller
Stock Split (EXAMPLE: A stock spilt can turn owning
100 shares of a company into owning 200, however the
price of each is now spilt in half)
The division of a single share of stock into more than one

share
Stockbroker (EXAMPLE: Jims job is to work with
individual investors and give them timely advice in
stocks)
A person who links buyers and sellers of stock
Brokerage Firm (EXAMPLE: Jims place of business is a
brokerage firm)
A business that specializes in trading stocks
Stock Exchange (EXAMPLE: New York Stock Exchange)
A market for buying and selling stock
OTC Market (EXAMPLE: Nasdaq)
An electronic marketplace for stocks and bonds
Nasdaq (EXAMPLE: Nasdaq is the third largest securities
market in the world)
American market for OTC securities
Futures (EXAMPLE: A buyer and seller agree on the
price for $100 a cow for the next year)

Contracts to buy or sell at a specific date in the future at a

price specified today
Options (EXAMPLE: Having the ability to buy a stock at
the price of $50 for six months)
Contracts that give investors the choice to buy or sell stock
and other financial assets
Call Option (EXAMPLE: The agreement to pay $100 a
share, regardless of what happens on the market, for
three months)
The option to buy shares of stock at a specified time in the
future
Put Option (EXAMPLE: Selling a stock for $50 for three
months, regardless of what happens to the price on the
market)
The option to sell shares of stock at a specified time in the
future
Bull Market (EXAMPLE: Investors buying stock and
expecting an increase in profit)
A steady rise in the stock market over a period of time
Bear Market (EXAMPLE: Investors selling stocks and
expecting a decrease in profit)

A steady drop in the stock market over a period of time

The Dow (EXAMPLE: The Dow came into existence in
1896)
Index that shows how certain stocks have traded
S & P 500 (EXAMPLE: Most of the stocks reported are
from the NYSE)
Index that shows the price changes of 500 different stocks
Great Cash (EXAMPLE: A long-term bull market turned
into a crash)
The collapse of the stock market in 1929
Speculation (EXAMPLE: After WW1, wealthy and
ordinary people alike were all trying to make their
fortunes on the stock market, causing the crash to be
even worse)
The practice of making high-risk investments with
borrowed money in hopes of getting a big return