Financial Assets

Jacob Clifford introduces financial assets in Macroeconomics Unit 4, discussing the nature and functions of money, including commodity and fiat money. He explains the money supply, M1 and M2, and the concept of liquidity. The video also covers the differences between stocks and bonds, highlighting their roles in investment. Clifford concludes by emphasizing the inverse relationship between interest rates and bond prices, and suggests further study in finance for personal financial decisions.

What are the three functions of money according to economists?

• Intrinsic value, medium of exchange, store of value

• Store of value, intrinsic value, unit of account

• Medium of exchange, unit of account, intrinsic value

• Medium of exchange, unit of account, store of value

Which of the following is an example of commodity money?

• Traveler's checks

• Gold

• Paper currency

• Digital currency

What is included in M1 money?

• Currency in circulation, checkable deposits, traveler's checks

• Savings accounts, CDs, money market funds

• Real estate, stocks, bonds

• Gold, silver, precious metals

Which of the following represents ownership in a company?

• Stocks

• Commodities

• Bonds

• Real estate

What is the primary difference between stocks and bonds?

• Stocks are less risky than bonds

• Bonds represent ownership, stocks are IOUs

• Bonds offer higher returns than stocks

• Stocks represent ownership, bonds are IOUs

What happens to bond prices when interest rates increase?

• Bond prices rise

• Bond prices remain unchanged

• Bond prices become volatile

• Bond prices fall

Why might someone choose to invest in stocks or bonds instead of keeping money in a checking account?

• To potentially earn more in the future

• To avoid all financial risks

• To ensure immediate liquidity

• To guarantee a fixed return