Economics Money (chap 10-11)

The United States today uses which kind of currency? a. representative money b. fiat money c. scarce money d. gold and silver

b. fiat money

Speculation is a. low risk investment with borrowed money in hope of small returns b. high-risk investment with borrowed money in hope of big returns c. investment of large amounts of money in mutual funds d. diversifying purchases of stock into many different kinds of companies

b. high-risk investment with borrowed money in hope of big returns

The revenue received from this type of bond is not taxed in federal or state income taxes. a. junk bonds b. municipal bonds c. US savings bonds d Treasury Notes

b. municipal bonds

The principal of a bond, or the face value of the bond, is known as the a. maturity b. par value c. coupon d. future

b. par value

Investment is the act of a. depositing money in a savings account b. redirecting resources from being used today so they can create future benefits c. using resources for current needs d. developing new products

b. redirecting resources from being used today so they can create future benefits

Which of these bonds are issued by the United States government? a. corporate bonds b. savings bonds c. junk bonds d. municipal bonds

b. savings bonds

Which of the following was NOT a cause of the Savings and Loans crisis of the 1980s? a. bad loans b. the gold reserve act c. high interest rates d. deregulation of the industry

b. the gold reserve act

fractional reserve banking

banking system that keeps only a fraction of funds on hand and lends out the remainder

Exchange of one set of goods or services for another.

barter

The nation's central banks system is the [blank].

Federal Reserve System

Which of the following is NOT an example of M1 money? a. currency b. a mutual fund c. travelers' check d. a checking account

b. a mutual fund

Investors who sell stocks for less than they paid for them experience a. capital gain b. capital loss c. return on investment d. negative dividend

b. capital loss

The most basic service a bank provides is a. a safe way to store and save money b. to pay interest c. to provide credit cards d. to provide mortgages

a. a safe way to store and save money

When the stock market falls over a period of time, it is known as a. bear market b. bull market c. crash d. depression

a. bear market

Futures are contracts to buy or sell which of the following at a specific date in the future at a price specified today. a. commodities b. bonds c. stocks d. foreign currency

a. commodities

A stock holder's share of a company's profits is called a(n) a. dividends b. splits c. capital losses d. yields

a. dividends

Representative money gets its value from the fact that a. it represented objects of value for which it can be exchanged b. it is backed up by silver or gold c. the government states that it is an acceptable means to pay debts d. it is a valuable commodity

a. it represented objects of value for which it can be exchanged

Bonds are a. loans b. dividends c. stocks d. certificates of deposit

a. loans

The most trades are made a. on the New York Stock Exchange b. At the Chicago Board of Trade c. on the NASDAQ-AMEX d. on the OTC market

a. on the New York Stock Exchange

A financial system brings together a. savers and borrowers b. savers and consumers c. banks and mutual funds d. governments and businesses

a. savers and borrowers

What condition is necessary for a fiat money system to work? a. Money owed must be paid on time b. The government must control the money supply c. Banks must hold sufficient gold to cover any paper money they give out d. customers with checking accounts cannot earn interest on those accounts

b. The government must control the money supply.

Uniformity of currency means that it is a. easily divided b. easy to count and measure c. accepted by everyone in society d. scarce

c. accepted by everyone in society

A bond's par value is generally repaid a. after 30 years b. when the lender demands it c. at maturity d. when interest rates change

c. at maturity

The option to buy a stock in the future at an agreed upon price is known as a: a. future b. put c. call d.

c. call

Assets that have liquidity are a. easy to borrow or lend b. easy to convert into silver and gold c. easy to turn into cash d. difficult to turn into cash

c. easy to turn into cash

A bank is an institution a. owned by merchants b. that collects taxes for the government c. for receiving, keeping, and lending money d. that regulates interstate commerce

c. for receiving, keeping, and lending money

The purpose of a financial intermediary is to help channel funds a. from one bank to another b. from savings bond to building project c. from savers to borrowers d. from stocks to bonds

c. from savers to borrowers

A stock split is most likely to occur when a. a company is losing money b. stockholders demand higher dividends c. the price of stock becomes too high d. the stock market as a whole is doing poorly

c. the price of stock becomes too high

What happens to the price or value of a bond when current interest rates rise? a. The value of the bond also goes up b. nothing, interest rates have no effect on bond prices c. the value of the bond goes down d. it depends if the bond is a federal or municipal bond

c. the value of the bond goes down

objects that have value in themselves as well as for their use as money.

commodity money

Coins and paper bills used as money.

currency

An example of a blue chip stock might be a. a new start-up firm b. a foreign-owned company that operates in another country c. an established company that is traded over the internet d. a large, well-known company traded over the NYSE

d. a large, well-known company traded over the NYSE

Which of the following is not a use of money? a. as a medium of exchange b. a unit of account c. a store of value d. a means of barter

d. a means of barter

A stock that reinvests its earnings in the business instead of paying regular dividends is called a. an income stock b. common stock c. preferred stock d. growth stock

d. growth stock

Which of the following is a reason for diversification? a. to get the highest possible return b. to get the most dividends c. to eliminate risk d. to reduce risk

d. to reduce risk

default

fail to pay back a loan

The [blank] was a paper currency printed with green ink that was issued by the US Treasury during the Civil War but not backed by gold or silver.

greenback

Compound Interest

interest paid on both principal and accumulated interest

simple interest

interest payed only on principal

mortgage

loan that is used to buy real estate

Anything that is used to determine value during the exchange of goods and services.

unit of account