Financial Assets- Macro Topic 4.1

Financial Assets- Macro Topic 4.1

Hey! How are you doing Econ students? This is Mr. Clifford. Welcome to ACDC Econ Right now we are going to cover some vocabulary that you need to understand the financial sector. I am making this short video to help you differentiate between all these key terms Let’s start with the very basic one There is a huge difference between income and wealth Income is the amount of money that comes to individuals for doing their job. But, wealth is the accumulated value of all their assets An asset is something that you own that has value So for a student, your car, clothes, your video game console are all examples of assets. In addition to assets, there’s also liabilities. Liabilities are financial obligations that you have to pay. So if you have a student loan or a car loan, that’s a liability. Now, these examples I’m using are for an individual but it also applies to businesses. They too have assets and liabilities. And, so does the government. Let’s talk about the government’s income. The government taxes individuals and businesses and gains tax revenue. If in a given year they spend less than their tax revenue, then they have a budget surplus. But, that hasn’t happened much in the United States. Instead, we run a budget deficit. That’s when annual government spending is greater than the tax revenue. And that brings us to the difference between the deficit and the debt. A budget deficit shows that the government is overspending in one year. But when you add all those budget deficits, you come up with the debt. Which is right there. Yeah, I know. Let’s go back and talk about financial assets. One of the key terms that you are going to see is the idea of liquidity. Liquidity is how easy it is to convert assets to cash without losing time or money. For example, if your asset was a house that’s not very liquid. It takes a lot of time, energy, and money to turn around and sell a house. There’s 3 types of financial assets that I want to talk to about to help you understand the difference. The first one are loans, which is an agreement between lenders and borrowers. Now, obviously, when you lend money you expect to get something in return and that is called an interest rate. You are going to be learning a whole lot about interest rates and using them when you learn about banking and monetary policy. Now it’s time for a question. Is a lone an asset or is it a liability? Well it depends, are you lending the money or are you borrowing the money? So, for the lender, it’s an asset and for the borrower, it’s a liability. The second financial asset that you are going to see is the idea of bonds. Bonds are IOU’s issued by the government or businesses. So, for example, If a business needs the money to buy some equipment it can issue a bond and they promise to pay back that money plus the interest rate to the person who bought the bond. And that same process also applies to governments. The last financial asset that I’m going to talk about is the idea of stocks. Stocks are share of ownership in a company and unlike bonds it is not an IOU. You are actually a partial owner of that corporation and you are entitled to some of their profits. Now, I bet you took this economics class expecting to learn a whole lot more about stocks but unfortunately that’s not really what we talk about. Although the stock market fluctuates and goes up and down with the general economy, it is not really an economic indicator. In general, the stock market doesn’t cause the economy to go up or down, it reacts when it goes up or down. Now that you have a general understanding of some of the key vocab, you are ready to move on to harder concepts in this unit. You are going to talk about money, banking, and something called monetary policy. If you like these videos make sure to subscribe. Also, take a look at the next video that is going to explain the 3 functions of money and the unit playlist that has a bunch of videos explaining all the key concepts and all the key graphs. Alright, till next time.


  • Rambo Videos

    November 22, 2014

    Sorry man I was looking for the band

  • xinbashizi

    December 5, 2014

    Awesome channel, Mr. Clifford. Really learned a lot from your videos. 😀 I was wondering though if you would ever go over some more advanced theories like the time inconsistency problem or the Ricardian Equivalence. I feel like students like me can really benefit from the ACDC touch and perspective to have a better understanding of these concepts.

  • Difan Wu

    December 9, 2014

    great channel ! hope to see video about some more advanced topics.  

  • Hanunah Ahmad

    January 8, 2015

    Hi Mr. Clifford . i enjoy watching your videos. It helped me a lot in my studies. But sometimes i have to pause the video so often because you talk sooooo fast. Anyway thank you for making me understand more about the subject.:)

  • little bunny

    May 18, 2015


  • Mrun Godbole

    June 8, 2015

    you are awesome! thank you so much 🙂

  • Thanos

    July 24, 2015

    thank you so much!

  • Caio C

    September 28, 2015

    thanks for this vid!

  • chengiawen

    December 1, 2015

    thank you so much

  • Kristina Breckenridge

    January 11, 2016

    Thank you so much Mr. Clifford! I hope that you know how helpful your videos are.

  • Pamela Fonseca

    March 13, 2016

    You are awesome! ! your videos help me a lot in my microeconomics class !!

  • nasser almarri

    April 7, 2016

    Fast I cant understand him

  • cm

    April 11, 2016

    I love you

  • Maplestage

    May 10, 2016

    What's the difference between loans and bonds ? Or is the term "loan" a more general concept that includes bonds ?

  • Tyler Durden

    January 14, 2017

    Nice belt

  • Linda Elena Zālīte

    February 21, 2017

    This is nice, but please talk slower! The point why are we watching the video is to understand! quite impossible if words just runs 😀

  • Noah B

    April 10, 2017

    Wow, this has given me much more confidence in my econ class. Really appreciate your work.

  • Charlie Edwards

    June 24, 2017

    $17 trillion dollars in US national debt?! DAMN!!!

  • mlccrl

    August 27, 2017

    You have clear concepts but the hurry you explain them generates neurosis. So we learn macroeconomics but we get anxiety. Is the course sponsored by a pharmaceutical company ?

  • Pranav Raghavan

    December 9, 2017

    Damn, US National Debt has grown 3 TRILLION dollars since this video was made about 3 years ago.

  • Manaf Bargash

    September 28, 2018

    I love you man!

  • Manav Sridharan

    December 13, 2018

    Mr. Clifford, can you please bring the beard back?

  • jeansmedegaard100

    March 17, 2019

    sir, please slow down, not all of us is from usa, and not same language. you sound like your on crack………

  • Lovely Mishra

    April 15, 2019

    Man whose videos I don't have to speed up .
    Thanks Clifford

  • skittles635

    May 21, 2019

    Your videos are the best! I am graduating from Master's and your videos help me a lot. I bet it would help many students if you also explained more complex models such as Mundell-Fleming model. I bought the Ultimate review packet as well, and happy to support teachers like you who really try hard to get the message across! Your students are really lucky 🙂

  • Rob P.

    January 10, 2020

    Speaks fast but good info


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