3b Econ Test Money and Banking

Money that can be easily divided into smaller units of value has the characteristic of a. Divisibility b. Exchange c. Denominations d. Durability

Divisibility

Generally speaking, AAA bonds are very safe investments. True False

True

An institution for receiving, keeping and lending money a. Bank b. Stock c. Bond d. Company

a. Bank

Question: Document A shows that, of payments that were not made in cash, the largest number were made by a. Checks b. Credit Cards c. Debit and Credit Cards Combined d. Debit Cards and Other Electronic Payments

a. Checks

Question: Which document's author would be most likely to agree with the following idea: "In order to limit harm to others, better regulations are needed"? a. Document A b. Document B c. Document C d. Documents A and C

a. Document A

Question: The authors of Document A and Document B disagree that a. Regulation makes companies behave honestly b. Company leaders who commit fraud should be punished c. The government has the ability to regulate companies d. Investors need information

a. Regulation makes companies behave honestly

Which of the following is true of financial assets in a secondary market but not those in a primary market? a. They can be resold b. They are less liquid c. They earn less interest d. They can be lent out for a year.

a. They can be resold

You want to spread out your investment money into different businesses. What do you invest in? a. a mutual fund b. a finance company c. a stock d. credit unions

a. a mutual fund

In the 1990s, the Russian people were no longer willing to sell goods and services in exchange for rubles. Which characteristic of money did the currency lack? a. acceptability b. uniformity c. portability d. durability

a. acceptability

The difference between representative money and fiat money is that a. representative money can be converted into silver or gold; fiat money cannot. b. representative money is always worth more than fiat money. c. fiat money is counted in coins; representative money is counted in paper bills. d. fiat money is more durable than representative money.

a. representative money can be converted into silver or gold; fiat money cannot.

Which of the following is an example of money as a unit of account? a. Purchasing a toy for $8.99 b. Checking the price of a camera at several stores before buying it at the lowest price c. Opening a savings account at a bank d. Lending a friend $25.00

b. Checking the price of a camera at several stores before buying it at the lowest price

A government institution that covers bank accounts against bank failure a. FAA b. FDIC c. FDA d. SEC

b. FDIC

Question: According to the graph, how well did the company's stock perform? (Hint: "The Market" = S&P 500) a. It performed better than both the market and the peer companies. b. It performed worse than both the market and the peer companies. c. It performed better than the market, but worse than the peer companies. d. It performed better than the peer companies, but worse than the market.

b. It performed worse than both the market and the peer companies.

Question: According to Document B, what is the problem with having fewer cash transactions? a. Electronic transactions have serious security risks. b. People who do not use cash have a harder time keeping track of their money. c. There is no problem with having fewer cash transactions. d. People who use electronic transactions are often charged additional fees.

b. People who do not use cash have a harder time keeping track of their money.

If you own a share or shares in company and the company has success, what will most likely happen to the value of your share or shares? a. Their value will stay the same b. They will increase in value c. They will decrease in value d. None of the above

b. They will increase in value

when stocks rise over time

bull market

Which of the following would be another word for "share" - as in owning a "share" of a company? a. Entirety b. Whole c. Part d. Multiple

c. Part

In June, Leslie earns $2,000. She wants to use this money to pay her tuition bill in September. Leslie puts this money in a savings account. Why? a. She wants to get the highest interest possible. b. She wants to take a risk in hopes that she will get a high return. c. She wants to be able to change her savings into cash soon. d. She wants to make a safe long-term investment.

c. She wants to be able to change her savings into cash soon.

What happens to a company's stock price when the company makes a profit? a. The stock price stays the same. b. The stock price goes in the same direction as the stock market c. The stock price goes up. d. The stock price goes down.

c. The stock price goes up.

If a well-known, established company has a product recalled due to its product being a safety risk to consumers, what will most likely happen to stock values of this company? a. The value of its stocks will stay the same b. They will increase in value c. They will decrease in value d. None of the above

c. They will decrease in value

The fact that money must withstand the wear and tear that comes from being used over and over again is a measure of its a. portability b. currency c. durability d. age

c. durability

Question: Based on this graph, what would have been the best investment over the five-year period? a. holding the Company Stock b. investing in peer stocks c. investing in the overall market (S&P 500) d. getting out of the market entirely

c. investing in the overall market (S&P 500)

What is the difference between how simple and compound interest are paid? a. simple: as long as money is in the bank; compound: year at a time b. simple: once a year; compound: quarterly c. simple: on principal only; compound: on both principal and interest d. simple: on savings accounts only; compound: on all other accounts

c. simple: on principal only; compound: on both principal and interest

Penny paints a picture for John in exchange for a table that he has built. How do Penny and John pay for their goods in this transaction? a. using a store of value b. through credit c. through bartering d. with currency

c. through bartering

When you buy with a debit card, where does the money come from? a. your savings account b. a finance company c. your checking account d. an automated clearing house

c. your checking account

when a stock is sold for less than what it costs

capital loss

bank that can lend to other banks

central bank

coins and paper bills used as money

currency

Which of the following is a characteristic of money? a. medium of exchange b. unit of account c. store of value d. All of the above

d. All of the above

The coins and paper bills used as money in a society a. Prices b. Bond c. Checks d. Currency

d. Currency

What happens during a bank run? a. The federal government orders all banks to close. b. States charter more banks than their citizens need. c. The price of gold specie suddenly increases. d. Customers try to withdraw more money than the bank has on hand.

d. Customers try to withdraw more money than the bank has on hand.

Why should you choose a bank loan instead of a loan from a finance company? a. Banks make their profits by lending money. b. Finance companies have fewer outlets than banks. c. Banks usually keep only a fraction of their funds on hand to lend. d. Finance companies usually charge higher interest rates than banks.

d. Finance companies usually charge higher interest rates than banks.

Question: According to the table, if you added $50.00 to this account every year, what effect would it have on the interest rate? a. It would increase by 50 percent. b. It would decease by 50 percent. c. It would double. d. It would remain the same.

d. It would remain the same.

What happens after you put money in a bank? a. The bank invests the money in the stock market. b. The bank uses the money to create new products. c. The bank stores the money until you want it back. d. The bank lends the money to a borrower(s).

d. The bank lends the money to a borrower(s).

Question: What does the cartoonist who drew Document C think of new government regulations on financial markets? a. They are necessary to prevent widespread financial problems b. They may cause problems, but they will give investors the information they need c. They are unconstitutional d. They are lengthy and overly complex

d. They are lengthy and overly complex

Which of the following is an example of demand deposits? a. money in a mutual fund b. credit cards c. traveler's checks d. money in a checking account

d. money in a checking account

has value because a government has ruled that it can be used to pay debts

fiat money

institution that helps move funds from savers to borrowers

financial intermediary

seizure of property from borrowers who are unable to pay back their loans

foreclosure

bank that belongs to the Federal Reserve System

member bank

all the money available in the U.S. economy

money supply

contracts to buy or sell commodities in the future at a price set today

municipal bonds

making high-risk investments with borrowed money

speculation

market for buying and selling stock

stock exchange

yearly rate of return on a bond if the bond is held until it matures

yield