Economics and Finance Flashcards

What is the stock market?

Answer: A marketplace where shares of publicly traded companies are bought and sold

The stock market is a collection of exchanges and markets where investors buy and sell shares of publicly listed companies, with major U.S. exchanges including the NYSE and NASDAQ.

What does it mean to 'diversify' an investment portfolio?

Answer: To spread investments across different asset types and sectors to reduce risk

Diversification means allocating investments among different asset classes (stocks, bonds, real estate) and sectors so that a loss in one area is offset by gains in another.

What is a mortgage?

Answer: A loan used to purchase real estate, with the property serving as collateral

A mortgage is a long-term loan secured by real estate, in which the borrower makes regular payments of principal and interest until the debt is repaid or the home is sold.

What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?

Answer: To insure depositors' funds at member banks up to $250,000 per account in case the bank fails

The FDIC, created in 1933 after widespread bank failures during the Great Depression, insures bank deposits up to $250,000, protecting customers if their bank becomes insolvent.

What is the difference between a debit card and a credit card?

Answer: A debit card draws funds directly from a bank account while a credit card borrows money from a lender to be repaid later

A debit card immediately deducts money from your checking account, while a credit card charges purchases to a line of credit that must be repaid, often with interest if not paid in full monthly.

What is supply and demand?

Answer: An economic model describing how the price and quantity of goods are determined by producer supply and consumer demand

Supply and demand is a foundational economic model explaining that prices rise when demand exceeds supply and fall when supply exceeds demand, reaching equilibrium at a market price.