Economics Unit 4

If a bond from the franchise Greens Galore has a coupon rate at 5%, a par value of $2,000, and will mature in 5 years, how much will the company have paid the holder when the company retires the department...

..$500 plus the original $2,000 $2500 total yield to maturity is $100 ($2000 X .05=$100)

Which of the following is true? (know 3 functions of money)

1. Medium of exchange 2. Unit of account 3. Store of value

Which of the following is an example of the barter system?

Instead of paying rent, you clean the house for the owner

What happens during a bank run?

More customers withdraw money than the bank has on hand

most trades are made on

NASDAQ

Why is representative money more useful than commodity money?

Representative money is portable, durable, divisible, and acceptable

Erin borrowed $18,000 to buy a car. Her loan will be paid off in 5 years. By the time that she pays off the loan, she will have made $20,327 in payments. Why did she have to pay $2,327 more than the price of her car?

She had to pay interest of $2,327 for the privilege of borrowing the principal of $18,000

How did the United States government make the American public have confidence in the nation's currency in the 1870s?

The government permitted state-chartered banks to issue currency. or by the govnerment establishing fiat currency

What did the federalist believe about banking?

They believed that a centralized banking system was necessary.

Your neighbor asks you to invest $500 at 5 percent interest in her catering business. She insists that with all the working parents in the neighborhood, a business that provides home-cooked meals has the potential for making huge profits. You want to invest but are concerned because your neighbor has not had any business experience. How can you offset your risk?

You can offset your risk by asking for a higher interest rate.

Which of the following is NOT and example of a liquid asset?

a certificate of deposit.

an example of a blue chip stock might be

a large well known company traded on NYSE

Because you want to reduce the risk of losing all your savings, if an investment fails, you want to invest in what?

a mutual fund

Which of the following is NOT and example of M1 money?

a mutual fund

When you pay for a new CD with a debit card, you authorize the transfer of money from your account to the music store s account. In other words, a payment by debit card is the electronic form of a payment by...

a. money order c. check b. credit card d. cashier's check

In the 1990s, the Russian people lost confidence in the value of the ruble, and many were no longer willing to sell goods and services in exchange for Russian currency. Which characteristic of money did the Russian currency lack?

acceptability

Which of the following is an example of representative money?

an IOU note

investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CD's money markets funds

are not insured by the FDIC

Which of the following is an example of money as unit of account?

checking the price of a camera at several stores before buying it at the lowest price (?)

Why is using money easier than using gold bars?

coins are more portable

What were "greenbacks"?

commodity money used by the Union during the Civil War

Who issues bonds?

corporations

Near money includes

deposits in savings accounts and money market mutual funds.

You need a new computer and you willl need a loan in order to buy one. Which lender is most likey to charge you the highest intrest rate on your loans?

finance company

In the 1800s, people in mining towns in the West often paid for goods with gold nuggets or gold dust. What was the function of gold?

it was used as currency

all of the following are low risk investments except

junk bonds

all of the following are basic components of bonds except

liquidity

to finance the building of a new police station a local government is most likely to issue a

municipal bond

American leaders in the early United States wanted to establish a stable banking system in order to...

promote international trade and economic growth

What is a mortgage used to purchase?

real estate

How did high interest rates affect savings and loans in the 1980s?

savings and loans lost money because they had to pay high interest on current deposits but received low returns from low interest loans they had made in the 1970s

What happens when you make a purchase using a credit card?

the credit card issuer pays the store

Which of the following was NOT a cause of the Savings and Loans crisis of the 1980s?

the gold reserve act

What is the largest source of income for banks?

the intrest they recieve from loans

a stock split is most likely to occur because

the price of the stock becomes too high

An accurate statement about bonds would be that

they are usually a low risk investment

savings bonds differ from most other bonds in that

they buyer does not receive periodic interest payments in exchange for a lower purchase price

Penny is an artist, and John is a carpenter. Penny agrees to paint a portrait of John's family in exchange for a handmade table created by John. How did Penny and John pay for the goods in their transaction?

through bartering

What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?

to make sure that customers do not lose money if a bank fails

Which of the following is the main disadvantage of using shells as money instead of coins?

uniformity

when you invest in a mutual fund

your money is invested in a variety of stocks and bonds