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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?
Checking the price of a camera at several stores before buying it at the lowest prics
Which of the following is the main disadvantage of using shells as money?
Uniformity
Which of the following is an example of representative money?
An IOU note
What is the purpose of the FDIC?
To make sure that customers do not lose money if a bank fails
What occurred during the Free Banking Era?
Currency varied widely from state to state
What is a mortgage used to purchase?
Real estate
Which of the following is NOT an example of a liquid asset?
A certificate of deposit
Why is using coins as money easier than using gold bars?
Coins are more portable
What happens during a bank run?
More customers withdraw money than the bank has on hand
what condition is necessary for a fiat money system to work?
The government must control the money supply
Which of the following was NOT a cause of the Savings and Loan crisis of the 1980s?
The gold reserve act
Which of the following is NOT an example of M1 money?
A mutual fund
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?
Finance company
Payment by debit card is the electronic form of payment by ____
Check
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?
Through bartering
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?
It was used as a currency
Why is representative money more useful that commodity money?
Representative money is portable, durable, divisible, and acceptable. It can also be exchanged for something else of value
How did the US government make the American public have confidence in the nation's currency in the 1870's
The government adopted the gold standard.
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?
If the bank fails, your deposits are protected up to $100,000
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___
Fractional reserve banking
The main advantage of diversification as an investment policy is that it ____
Reduces risk to investors
An accurate statement about bonds would be that
They are usually a low-risk investment
Savings bonds differ from most other bonds in that
The buyer does not receive periodic interest payments in exchange for a lower purchase price
To finance the building of a new police station, a local government is most likely to issue a ___
Municipal bond
Investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CDs , money marker funds _____
Are not insured by the FDIC
An example of equity is
A share of stock
An example of blue chip stock might be
a large, well-known company traded on the NYSE
The Dow Jones Industrial Average consists of
30 stocks
When you invest in a mutual fund,
Your money is invested in a variety of stocks and bonds
You do not have to pay state taxes on interest earned on
Treasury bills
all of the following are low-risk investments EXCEPT
Junk bonds
All of the following are basic components of bonds EXCEPT
Liquidity
A stock split is most likely to occur when
The price of a stock becomes too high
The most trades are made
on the OTC market
You borrow money from your parents to start a bagel delivery service to the hockey rink in the early mornings, you are acting as
an entrepreneur
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 ___
Liquidity, since she'll need to use the money in a short time
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 ___
credit risk
Because you want to reduce the risk of losing all your savings if an investment fails, you decide to invest in _____
A mutual fund
Since bonds are considered among the safest investments, you would expect that they would ____
Have low interest rates
Why would a person invest in junk bonds?
Junk bonds can pay very high interest rates