Glossary for Vocabulary Terms

Glossary for Vocabulary Terms
CE.10 - Structure and Operation of the U.S. Economy

bank - a business or organization that takes in deposits of money, and uses that money to make loans. Banks are important financial institutions because they encourage saving, pay interest on deposits, and they make money available for loans to people and businesses.

circular flow - a term for the continuous flow of money, resources, goods, and services among individuals, business, and the government in the economy.

corporation - a form of business organization which often has large numbers of investors as part owners. The owners are called shareholders or stockholders, and receive a share of the profits. Under law, however, the corporation has a separate legal identity from the owners. The result is that the individual shareholders have no liability (responsibility) for the debts the business might have. If the corporation goes out of business while still in debt, for example, the shareholders themselves do not have to pay the debt.

credit union - a type of bank open only to members of the sponsoring group, such as an employer or worker’s association.

entrepreneur - a person who starts a new business, in hope of making profits.

financial capital - money or other forms of wealth that are available for investment in business. When a person saves money in a bank, a business can borrow that money from the bank to help the business grow or make better products. Money invested in shares of stock of a corporation is also financial capital.

financial institution - a term for banks, savings and loans (S&Ls), credit unions, and securities brokerages. These businesses accept deposits of money, pay interest on the deposits, and make loans.

global economy - a term for the growing world-wide trade in goods and services.

interest - the payment made for the use of someone else’s money. A bank, for example, pays interest to the depositor, then charges a somewhat higher interest to the borrower. Normally, interest is stated as a certain percent of the money per year.

investment - a purchase of something in hope that it will increase in value over time, or help one's business or savings increase in value.

liability - in business, responsibility for a debt or action.

partnership - a form of business organization that has two or more owners who share the profits of the company. In a partnership, each partner is personally liable (responsible) for any debt the business might have.

profit - the money earned by a business above its expenses. To make it a formula or equation, we can write: profit = income minus costs.

proprietorship - a form of business organization in which an individual owns the entire business, and receives all the profit. It is also called a sole proprietorship. In a proprietorship, the owner is personally responsible for any debt the business might have.

public goods and services - things like parks, highways, police, and national defense that are provided for the public by the government. They are typically paid for with taxes on individuals and businesses.

savings and loan associations (S&Ls) - a type of bank that originally concentrated on providing home loans. Today, however, most provide general banking services.

securities - certificates that represent a financial obligation by whoever issues the security to whoever buys it. A corporation, for example, may sell shares of stock to investors to raise money to expand the business. Governments may also issue securities - Savings Bonds and Treasury Bonds are examples.

securities brokerages - businesses that help their customers buy and sell various investments, such as shares of corporate stock. (Often they are called stock brokers, even though they handle other investments besides just stocks.) They are important because they make it possible for businesses to get money needed for growth, and make it possible for individuals to benefit from business growth.

stock market - a place where shares of ownership in a corporation are bought or sold. Example: The New York Stock Exchange on Wall Street in New York City. Individuals can buy and sell in the stock market through a securities brokerage (stock broker), including many who have set up online trading systems for their customers.