Explain the following concisely & simply: the stock market, interest rates, inflation, reserves.?
I have been trying to understand how the whole system of finance and economics work but I can't seem to grasp anything from the news or TV. Can someone explain in a kind of "Idiot's Guide" style how the heck the whole finance system operates and what the heck is the stock market? Thanks
Answer:
Honestly there isn't a really short, concise answer, but I'll try...
The stock market is a way for people/entities to buy and sell comodities. That can mean stocks which are measures of ownership in a company, bonds, which are measures of debts owed by companies or municipalities and many other comodities. The values of these items are indicated by their price. These vary based upon suppply and demand and the underlying strength of the company or municipality that the item represents.
So for example a stock (ownership in a company) price will vary depending on how financially strong that underlying company is, how many shares are available, and how many people are interested in buying or selling that particular stock and whether they think the value of that stock as indicated by stock price will rise or fall depending on all of the above variables.
As another example, a bond (part of the debt owed by an entity) will vary in price based upon the rate of interest paid on that particular bond, the liklihood that they will continue to pay that interest and principal and the taxable overall return on that particular bond.
These are just a couple of examples of what exchange hands on the stock exchanges, but I hope that helps answer your question.
wnyken
Stock Market- A central location where stocks of member corporations are bought and sold on a daily basis.
Interest Rates - Interest rates are the cost of borrowing money. Interest rates are generally expressed as a percentage of the amount borrowed.
Inflation - Inflation is a decline in the value of money (dollars) relative to the things you can purchase. Inflation results generally from an over production of dollars by the Federal Reserve.
Reserves - The requirement that a certain percentage of money or assets be uncommitted. Reserves are required by many institutions in order to protect their investments. Reserves are generally expressed as a percentage, but often are denoted as a fixed dollar amount.
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Answer:
Honestly there isn't a really short, concise answer, but I'll try...
The stock market is a way for people/entities to buy and sell comodities. That can mean stocks which are measures of ownership in a company, bonds, which are measures of debts owed by companies or municipalities and many other comodities. The values of these items are indicated by their price. These vary based upon suppply and demand and the underlying strength of the company or municipality that the item represents.
So for example a stock (ownership in a company) price will vary depending on how financially strong that underlying company is, how many shares are available, and how many people are interested in buying or selling that particular stock and whether they think the value of that stock as indicated by stock price will rise or fall depending on all of the above variables.
As another example, a bond (part of the debt owed by an entity) will vary in price based upon the rate of interest paid on that particular bond, the liklihood that they will continue to pay that interest and principal and the taxable overall return on that particular bond.
These are just a couple of examples of what exchange hands on the stock exchanges, but I hope that helps answer your question.
wnyken
Stock Market- A central location where stocks of member corporations are bought and sold on a daily basis.
Interest Rates - Interest rates are the cost of borrowing money. Interest rates are generally expressed as a percentage of the amount borrowed.
Inflation - Inflation is a decline in the value of money (dollars) relative to the things you can purchase. Inflation results generally from an over production of dollars by the Federal Reserve.
Reserves - The requirement that a certain percentage of money or assets be uncommitted. Reserves are required by many institutions in order to protect their investments. Reserves are generally expressed as a percentage, but often are denoted as a fixed dollar amount.
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