Midterm Study Guide

Midterm Study Guide - Midterm- BUSN115 1 - Know the...

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Midterm- BUSN115 1 - Know the definition of supply and demand. Supply- the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time Demand- the quantity of products that people are willing to buy at different prices at a specific time The key factor in determining the quantity supplied and the quantity demanded is price. If the seller lowers the price, the quantity demanded is likely to increase. If the seller raises the price, the quantity demanded is likely to decrease. 3 - What drives up interest rates The interest rate paid on a bond varies according to factors such as the state of the economy, the reputation of the company issuing the bond, and the going interest for government bonds or bonds of similar companies. 4 - Know the definition of capital Capital budget- a budget that highlights a firm’s spending plans for major asset purchases that often require large sums of money Capital expenditures- major investments in either tangible long term assets such as land, buildings, and equipment, or intangible assets such as patents, trademarks, and copyrights Capital gains- the positive difference between the purchase price of a stock and its sale price Capitalism- an economic system in which all or most of the factors of production and distribution are privately owned and operated for profit 5 - Understand the affects of the Federal Reserve System Fed. Reserve Systems consists of five major parts: (1) Board of Governors (2) Federal Open Market Committee (3) 12 Fed. Reserve Banks (4) 3 Advisory councils (5) Member banks of the system The fed buys and sells foreign currencies, regulates various types of credit, supervises banks, and collects data. The fed determines the reserve requirement that is the level of reserve funds all financial institutions must keep at one of the twelve federal reserve banks. It buys and sells government securities and open market operations. Finally it lends money to member banks at an interest rate called the
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Midterm Study Guide - Midterm- BUSN115 1 - Know the...

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