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40 Cards in this Set
- Front
- Back
Which of the following is an example of money as a unit of account?
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Checking the price of a camera at several stores before buying it at the lowest prics
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Which of the following is the main disadvantage of using shells as money?
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Uniformity
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Which of the following is an example of representative money?
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An IOU note
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What is the purpose of the FDIC?
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To make sure that customers do not lose money if a bank fails
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What occurred during the Free Banking Era?
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Currency varied widely from state to state
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What is a mortgage used to purchase?
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Real estate
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Which of the following is NOT an example of a liquid asset?
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A certificate of deposit
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Why is using coins as money easier than using gold bars?
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Coins are more portable
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What happens during a bank run?
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More customers withdraw money than the bank has on hand
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what condition is necessary for a fiat money system to work?
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The government must control the money supply
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Which of the following was NOT a cause of the Savings and Loan crisis of the 1980s?
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The gold reserve act
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Which of the following is NOT an example of M1 money?
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A mutual fund
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You need a new computer, and you will need a loan in order to buy one. Which lender is most likely to charge you the highest interest rate on the loan?
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Finance company
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Payment by debit card is the electronic form of payment by ____
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Check
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Penny egrees to paint a portrait of John's family in exchange for a handmade table created by John. How did they pay for the goods in their transaction?
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Through bartering
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In the 1800's, people in mining towns in the west often paid for goods with gold nuggets or gold dust. What was the function of gold?
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It was used as a currency
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Why is representative money more useful that commodity money?
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Representative money is portable, durable, divisible, and acceptable. It can also be exchanged for something else of value
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How did the US government make the American public have confidence in the nation's currency in the 1870's
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The government adopted the gold standard.
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You decide to open a savings account, and you notice a sign in your bank that indicates deposits are FDIC insured. What protection does that give you?
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If the bank fails, your deposits are protected up to $100,000
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Maria Makes a deposit of 10,000 into her Smalltown Bank savings account. The bank holds 20% of her deposit, then lends the remaining $8,000 to Ben to buy a new car. This practice of retaining only a portion of deposits on hand is called___
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Fractional reserve banking
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The main advantage of diversification as an investment policy is that it ____
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Reduces risk to investors
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An accurate statement about bonds would be that
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They are usually a low-risk investment
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Savings bonds differ from most other bonds in that
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The buyer does not receive periodic interest payments in exchange for a lower purchase price
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To finance the building of a new police station, a local government is most likely to issue a ___
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Municipal bond
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Investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CDs , money marker funds _____
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Are not insured by the FDIC
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An example of equity is
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A share of stock
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An example of blue chip stock might be
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a large, well-known company traded on the NYSE
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The Dow Jones Industrial Average consists of
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30 stocks
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When you invest in a mutual fund,
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Your money is invested in a variety of stocks and bonds
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You do not have to pay state taxes on interest earned on
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Treasury bills
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all of the following are low-risk investments EXCEPT
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Junk bonds
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All of the following are basic components of bonds EXCEPT
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Liquidity
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A stock split is most likely to occur when
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The price of a stock becomes too high
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The most trades are made
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on the OTC market
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You borrow money from your parents to start a bagel delivery service to the hockey rink in the early mornings, you are acting as
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an entrepreneur
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In June, Leslie wins a cash prize of $2000. She plans to use this money to pay her tuition bill in September. Leslie puts this money in a savings account because her main priority is ___
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Liquidity, since she'll need to use the money in a short time
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Against your better judgement, you lend $100 to your cousin Manny, who has a reputation for failing to pay back loans. You are taking a ___
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credit risk
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Because you want to reduce the risk of losing all your savings if an investment fails, you decide to invest in _____
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A mutual fund
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Since bonds are considered among the safest investments, you would expect that they would ____
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Have low interest rates
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Why would a person invest in junk bonds?
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Junk bonds can pay very high interest rates
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