FINANCIAL PANIC
The Panic Ends when low prices attract investors
Recovery or Rescue
What is the main reason for the difference Between a saving account and CDs (Certificate of Deposit)?
CD have a higher return(Interest Rate) because they are not Liquid
Buying a House
Mortgage
An example of representative money
A check
In March, Taveon wins a cash prize of $20,000. He plans to use this money to pay for college tuition due in August. Taveon puts the money in a savings account instead of a mutual fund. What is his main priority?
Liquidity, since he will need the money in a short period of time.
Innovation spurs economic confidence and banks make credit easily available
Economy Grows
Why do millionaires not become wealthy from investing in a savings account?
Greater liquidity offers lower potential returns
How can an investor reduce his risk
Diversification
The government must control the money supply
Fiat Money
How does the idea of compound interest attract investors
Earn more on your investment
Collapse in Confidence making people want to hold to cash
Bubble Bursts
What is a high risk investment?
Stock Market (Hedge Fund)
Deposits:
Savings Account
Money Market Accounts
Mutual Funds
M2
The transfer of money from your account to the store's account
Check (Debit Card)
Daily Double
A $100 sweater at Jackson's Department Store is on sale for 50% off. An identical $100 sweater at Malley's Department Store was originally market down 40%, but Malley's is having a clearance sale this week and is subtracting an additional 15% from its sale prices. At which store is the sweater cheapest?
At Jackson's, the sweater is $100 - .5($100) = $50. At Malley's, the sweater was originally marked down to $100 - .4($100) = $60. With an additional 15% reduction, the new price is $60 - .15($60)= $51. It's cheaper at Jackson's.
Profits soar speculators enter the market
Speculation Increases
When opening a bank account what protection do you have your money will be safe?
FDIC up to $250,000
Emmah borrowed $9000. to add to her money she received from her grades. Her loan will be paid of in five years. By the time she pays off the loan she will have made $10,163.50 in payments. Why did she have to pay 1,163.50 more than the price of the car?
She paid $1,163.50 in interest for the privilege of borrowing the principal of $9000.
Russian people lost confidence in the value of the Ruble because of the war in Ukraine, stores no longer excepted Russian currency. What characteristic of money is this?
Acceptability
Daily Double:
Isis and Ramel are planning to travel to South Africa this summer, but they are down to their last dollar and can't go. While reading the financial section of the paper, they discover that one South African rand can be exchanged for 25 Japanese Yen, that 150 Japanese yen can be exchanged for $1 dollar and $1 can be exchanged for 5 rands. Is there a way you can earn travel money by exploiting these exchange rates?
Buy 150 yen with $1 dollar then use them to buy 6 rands. Pocket one rand and buy your dollar back with the remaining 5 rands. repeat as needed.
People withdraw funds from banks which creates a bank run
Panic
Nolan makes a deposit of $5000. into his small-town bank savings account. The banks holds $1000. of his deposit and lends $4000. to Raquel to buy a car. This practice of retaining a portion of his deposit on hand is called?
Fractional Reserve Banking
What happens when you make a purchase using a credit card?
The credit card company pays the store
Instead of paying rent, you clean the house for the owner
Barter system
Your neighbor Ana and Miya asks you to invest $500 at 5 % interest in her catering business. She insists that with all the working parents in the neighborhood a business that provides home cooked meals has the potential form a king huge profits. You want to invest but are concerned because your neighbor has not had any business experience. How can you offset your risk ?
Ask for a higher interest rate