Ch. 1 - Conceptual Problems 1 I used a credit card to...

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Conceptual Problems: 1. I used a credit card to purchase a textbook at the bookstore, I ordered textbooks online using my debit card and I bought groceries at the grocery store using my debit card. These things might have been done 50 years ago with writing checks for them in person, and as far as online, it didn't exist, so I would've had to buy my books personally at a bookstore. 2. Money, financial instruments, financial markets, financial institutions, central banks. Core principle 1 states that time has value, to make the most of your money time must be factored into the situation. For instance, the longer amount of time that your loan is open, the more interest you will have to pay. Core principle 2 states that risk requires compensation. Insurance policies, which are financial instruments, are examples of how to transfer risk to those better equipped to bear it. The insurance company will assume the risk of someone having a major accident and will have more money available to pay for any losses. Core principle 3 states that information is the basis for decisions. In order to make smart decisions, we must receive our information from people that we trust. A lot of times, this information comes from financial institutions such as banks and security firms. Core principle 4 states that markets determine prices and allocate resources. Markets are the heart of the economic system, like the New York Stock Exchange is an example of a financial market and tells us how businesses are doing, and tells us what is valuable and what is not. It determines the price we pay for certain things and how we should divide up our resources in order to get the most out of our money. Core principle 5 is stability improves welfare. This is true on both small and large scales. The primary function of a central bank such as the Federal Reserve is to keep the economy of that country stable through rough times as well as prosperous times.
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This note was uploaded on 10/31/2010 for the course ECON 2310 taught by Professor Williams during the Spring '10 term at Western New Mexico.

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Ch. 1 - Conceptual Problems 1 I used a credit card to...

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