Economics - Stock Market Flashcards
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Questions and Answers

What is an investment?

The use of income today that allows for a future benefit.

What is a financial market?

Where buyers and sellers exchange financial assets.

What is a mutual fund?

A group of a wide range of stocks.

What is risk in the context of investments?

<p>The possibility for loss on an investment.</p> Signup and view all the answers

What is return?

<p>Profit or loss made on an investment.</p> Signup and view all the answers

What is diversification?

<p>The practice of distributing investments among different financial assets.</p> Signup and view all the answers

What is a stock exchange?

<p>A market where securities are bought and sold.</p> Signup and view all the answers

What is a capital gain?

<p>Profit made from the sale of securities.</p> Signup and view all the answers

What is common stock?

<p>A share of ownership in a corporation that gives the holder voting rights and a share of the profits.</p> Signup and view all the answers

What is preferred stock?

<p>A share of ownership in a corporation giving the holder a share of profits but, in general, no voting rights.</p> Signup and view all the answers

What does a stockbroker do?

<p>Buys and sells securities for customers.</p> Signup and view all the answers

What is a stock index?

<p>Measures and reports the change in prices of a set of stocks.</p> Signup and view all the answers

What is a bull market?

<p>A situation in which stock market prices rise steadily over time.</p> Signup and view all the answers

What is a bear market?

<p>A situation in which stock market prices decline steadily over time.</p> Signup and view all the answers

What is the DOW Jones?

<p>The average price of 30 high performing stocks, used as a measure of general market trends.</p> Signup and view all the answers

What is NASDAQ?

<p>America's largest electronic stock market.</p> Signup and view all the answers

What is NYSE?

<p>A stock exchange based in New York City considered the largest equities-based exchange in the world based on total market capitalization.</p> Signup and view all the answers

What is stock?

<p>A share of ownership in a corporation.</p> Signup and view all the answers

What is speculation in investing?

<p>The practice of making high-risk investments with borrowed money in hopes of getting a big return.</p> Signup and view all the answers

What is a share?

<p>A portion of stock.</p> Signup and view all the answers

What is a stock split?

<p>The division of each single share of a company's stock into more than one share.</p> Signup and view all the answers

What is a brokerage firm?

<p>A business that specializes in trading stocks.</p> Signup and view all the answers

What is a dividend?

<p>A share's portion of the company's profit.</p> Signup and view all the answers

What are DOW stocks?

<p>Thirty top performing stocks.</p> Signup and view all the answers

What is white collar crime?

<p>Financially motivated crime committed by business or government officials.</p> Signup and view all the answers

What is embezzlement?

<p>When a person who has been entrusted with money or property takes it for his or her own benefit.</p> Signup and view all the answers

What is forgery?

<p>When a person passes a false or worthless instrument such as a check with the intent to defraud or injure another person.</p> Signup and view all the answers

What is insider trading?

<p>When a person uses inside, confidential, or advance information to trade in shares of publicly held corporations.</p> Signup and view all the answers

What is securities fraud?

<p>The act of artificially inflating the price of stocks by brokers so that buyers can purchase a stock on the rise.</p> Signup and view all the answers

What is a Ponzi scheme?

<p>A fraudulent investment plan in which the investments of later investors are used to pay earlier investors.</p> Signup and view all the answers

What is the difference between common and preferred stock?

<p>Common stock has voting rights, while preferred stock has no voting rights.</p> Signup and view all the answers

What is the difference between income and growth stocks?

<p>Income stocks pay dividends when the company makes a profit, while growth stocks reinvest all profits back into the company.</p> Signup and view all the answers

What is the difference between NYSE and NASDAQ?

<p>NYSE is the largest exchange with a physical location, while NASDAQ is the largest electronic exchange.</p> Signup and view all the answers

Why do many investors choose to invest in mutual funds instead of individual stocks?

<p>Mutual funds are much safer because they are groups of stocks that represent a large variety of industries.</p> Signup and view all the answers

Study Notes

Investment Basics

  • Investment refers to using current income to generate future benefits.
  • Financial markets facilitate the exchange of financial assets between buyers and sellers.

Understanding Financial Products

  • Mutual funds consist of diversified portfolios of various stocks.
  • Risk denotes the potential for loss associated with investments.
  • Return represents the profit or loss realized on an investment.

Strategies and Principles

  • Diversification reduces risk by spreading investments across different assets.
  • Stock exchanges are platforms where securities are traded.
  • Capital gain is the profit earned from selling securities at a higher price than the purchase price.
  • Common stock provides voting rights and a share of profits, while preferred stock generally lacks voting rights but entitles holders to profit shares.

Market Dynamics

  • Stockbrokers facilitate the buying and selling of securities for clients.
  • Stock indices track the price changes of a specific set of stocks, providing insights into market performance.
  • Bull markets are characterized by rising stock prices, whereas bear markets involve declining prices.

Stock Market Indicators

  • The DOW Jones index measures the average price of 30 high-performing stocks, reflecting general market trends.
  • NASDAQ is the largest electronic stock market in the U.S., prominent for technology stocks.
  • NYSE is the largest equities exchange, located in New York City, handling trades for top U.S. and global companies.

Stock Ownership and Investment Practices

  • Stock represents a share of ownership in a corporation.
  • Speculation involves high-risk investments made with borrowed money in anticipation of substantial returns.
  • Shares denote portions of stock.

Corporate Actions and Investment Clubs

  • A stock split occurs when a company divides existing shares, increasing the number of shares available.
  • Brokerage firms specialize in facilitating stock trades for clients.
  • Dividends are profit distributions to shareholders based on company earnings.

Notable Stocks and Crimes

  • DOW stocks include major corporations like Apple, McDonald's, and Coca-Cola.
  • White-collar crimes include financially motivated offenses by business or government officials, such as embezzlement and forgery.
  • Insider trading involves trading shares based on confidential information.
  • Securities fraud artificially inflates stock prices to mislead investors.
  • Ponzi schemes use newer investors’ funds to pay earlier ones, creating a facade of high returns.

Purchasing Options and Preferences

  • Common vs. Preferred Stock: Common stock offers voting rights; preferred stock does not.
  • Income vs. Growth Stocks: Income stocks provide dividends; growth stocks reinvest profits into the company.
  • NYSE vs. NASDAQ: NYSE has a physical trading floor; NASDAQ operates electronically.
  • Mutual funds are often preferred by investors for safety as they hold diversified portfolios across industries.

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Description

This flashcard quiz focuses on key terms related to the stock market. Each card includes a word with its definition, helping you understand essential concepts in economics. Perfect for students and enthusiasts looking to enhance their financial literacy.

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