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Investment

anytime I buy something hoping it'll increase in value

Stock Market

legal gambling

Stocks

piece of a company

Kinds of stocks

Common and Preferred

Common Stock

Cheaper, more affordable; get small voice in company, get money last

Preferred Stock

No say in company, more experience, considered part of overhead, get paid like a bill money first

Dividend

Profit from company divided among stock holders

Ponzi

took others money from stock/fake investments

2 ways to make money on stock

selling or dividend

Stock Market Crash

Oct. 30th, 1929

Stock Market Analyst

Do nothing but, research

Broker

person who advises us how to spend money

Security and Exchange Commission

make sure company plays fair

Prospectus

tells how company is doing

Coveat emptor

buyers beware

Proxi

allow someone else to vote for them

Over-the-Counter

small business selling locally; want to expand, put out brochures for brokers

New York Stock Exchange

Biggest stock exchange in the world U.S. National market

Dow Jones

numbers being quoted what 30 select company's done today

Standard and Poors

Select 500 company's of what they average

National Association of Security Dealers of Automated Quotes (NASDAQ)

2nd American exchange

IPO

Initial Public Offering

Index

thumb tack of how NY is doing

Stock Split

company issues more stock while lowering price, stock gets to expensive

Price of Stock

it's due to supply and demand

During Stock Split

it's completely neutral, stock doesn't lose value even with price drop

2 types of investments

Real and financial

Real investments

create something new (the better of the 2)

Financial investments

buy something that already exist

Money

anything accepted as payment for a debt

Barter

trading a good for another

Legal tender

many issued by government

Money's value

is affected by supply and demand

Inflation

value of dollar goes down; price goes up

Deflation

Value of dollar goes up; price goes down

Russia

Reached hyper inflation, up to 1000%

Consumer Price Index (CPI)

measures value of dollar

4 Parts of FED

1. Board of 7 people, purpose is long term policy, 14 year terms, the president appoints them
2. Open Market Committee, control monetary policy
3. 12 district banks separated by financial activity
4. Presidential advisory counsel, advise presidential, no power

Functions of FED

1. act as banker to U.S. government
2. act as banker to commercial bank
3. supervise commercial bank
4. control monetary policy

Reserve requirement

bank has to keep only a certain amount of money on hand

Fiscal policy

ability to tax and spend, controlled by president and congress

interest rate

amount paid to the bank to use their money

discount rate

rate FED charges a commercial bank when they make a loan tax

Federal spending

less money for the people

Chairman of Fed

Bernacky

Law of Diminishing returns

If I add variable to fixed productivity with increase for a time, but then fall

Productivity

output worker per hour

Leading Economic Indicators

tells how well economy is functioning

Indicators

1. Productivity
2. Per captia incase (average income for average person)
3. Growth National Product (GNP) value of all goods and services produced by a country anually
4. Stock market -long term trends
5. CPI

Growth Domestic Product

physically produced in the country

Unemployment rate

16 and up actively seeking

Unemployment rate for U.S.

20%

Business cycle

what will happen in a mixed economy over an amount of time

C-Contraction

gets smaller
employment falls
consumer and business spending is done

R-Recession

bad economic times
employment is low
business and consumer spending is low

E-Expansion

getting bigger/grows
Employment goes up
Consumer and business spending goes up

B-Boom

extremely good economic times
Full employment <5%
Consumer and business spending extremely high

D-Depression

extremely bad economic times
employment is less then 70%
consumer and business spending stops

3 types of unemployment

Cyclical, Frictional, and Structural

Cyclical

lose job due to change in cycle

Frictional

temporary change; unavoidable

Structural

due to change in local economy or change in technology; local disruption

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