medium of exchange

-recon by others

store of value

-holds value

unit of account

-price in dollars

because without it we would be a bartar system

In a barter system, if I want potatoes, and have oranges to trade, the person with the potatoes has to want oranges to be willing to trade with me. (I could be stuck with my oranges). With the use of money, I can give him a known amount of value in money, which he can buy what he wants to with.

hyperinflation- very rapid increases in price level

inflation- increasing price level

disinflation- slowdown in infl. rate 5% to 3%

deflation- price decline

real prices vs. nominal prices- real prices are adjusted to inflation

ceteris paribus- other things being equal

-gold, copper, silver argicultural items 

- control, supply of gold

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-paper

-set by gov. reg

-control; faith on god

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Classify a deposits as a liability

Assets? 

Cd's 

cash, loans, securites

-what you or your company is worth

what you own - what you owe 

(assets - liabilities)

captial- money 

2. equation of exchange MV=PT 

m =amount of money

v= velocity or circulation of money

P= price level

T= amount of real trade transactions

3. variation of QT 

%ΔM + %ΔV = %ΔP + %ΔQ

M is amount of money, V is velocity or circulation of money, P is the price level, and T is the amount of real trade transactions (replaced with Q to give us P*Q = GDP). 

GDP/M=V or PT/M=V

a ratio of nominal gdp to a measure of the money supply 

turnover- the # of times one dollar is used to purchase final goods and services included in GDP

primary- investment banks underwriting fees on IPO

- public offerings attracted by investment banks

-stocks and bonds

-corp raises funds through new issues of securites

secondary- NYSE;NASDAQ; NY bond exchange

-sale through investors

-markets that trade financial instruments once they are issued

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(interest rate/what you pay)*par value=current yield 

The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield[image] expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. Sometimes this is simply referred to as "yield" for short.

Coupon / interest rate = Bond Price

Positive and neg yield curve:

Business Cycle and the Shape of Yield Curve

 Stage 1 –recession: upsloping yield curve

 Stage 2 –expansion: flat or inverting yield curve

 Stage 3 –cycle peak: downsloping yield curve

 Stage 4 –slowing economy: humped yield curve

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Who was the Gold standard locking prices down: -Bretton Woods fixed exchange rates to dollar with dollar being convertible into gold; ended 1968/1971 by Nixon;

An investment-grade security backed by a pool of bonds, loans and other assets[image]. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds.