Test 1

Front 1

T/F Owner risk is limited in a corporation.

Back 1

True

Front 2

T/F Owner risk is not limited in a corporation.

Back 2

False

Front 3

T/F You must put up $8,000 to buy $8,000 worth of stock in a cash account but only $6,000 to buy $8,000 worth on margin if the margin requirement is 25%.

Back 3

True

Front 4

T/F When a stock price rises, a short seller is making money.

Back 4

False

Front 5

T/F When a stock price falls, a short seller is making money.

Back 5

True

Front 6

Which way does a stock have to go for a short seller to make money?

Back 6

The stock has to fall.

Front 7

Which way does the stock have to go for a short to lose money?

Back 7

The stock has to rise.

Front 8

T/F Corporations file corporate tax returns but proprietorships and partnerships report on the owner's personal tax return.

Back 8

True

Front 9

T/F The bid is the price for which a market maker will buy a stock.

Back 9

True

Front 10

T/F The offer is the price at which a person sells a stock.

Back 10

True

Front 11

T/F If a stock paid $1 dividend and was priced at $20, its yield is 1%.

Back 11

False

Front 12

T/F Load mutual funds are bought from brokers while no-load funds are bought from mutual fund companies

Back 12

True

Front 13

T/F Bonds and preferred stock would be appropriate investments if growth was the investment goal.

Back 13

False

Front 14

T/F Stock holders take a greater risk than bondholders.

Back 14

True

Front 15

T/F Broker firms make markets in stock traded on the NYSE while designated market makers make markets on NASDAQ.

Back 15

False

Front 16

T/F Debenture bonds represent unsecured claims against the corporation while mortgage bonds are secured claims.

Back 16

True

Front 17

T/F When interest rates fall, the prices of outstanding bonds also fall.

Back 17

False

Front 18

T/F When interest rates rise, the prices of outstanding bonds also rise.

Back 18

False

Front 19

T/F when interest rates fall, the price of outstanding bonds rise.

Back 19

True

Front 20

T/F When interest rates rise, the price of outstanding bonds fall.

Back 20

True

Front 21

T/F Bondholders take a greater risk than stockholders.

Back 21

False

Front 22

T/F If the market sets the price of the pound, an increase in the demand of the pound will raise its price but durning the Bretton Woods Era pounds would be supplied from a stabilization fund to keep the price unchanged.

Back 22

True

Front 23

T/F Durning the Bretton Woods Era, if the British stabilization fund ran out of either pounds either stablization would end or the pound would be devalued.

Back 23

False

Front 24

T/F The price of a convertible preferred stock or a convertible debenture must eventually rise if the price of the common stock rises but the price of a non-convertible stock or debenture would likely fall if intrest rates are rising.

Back 24

True

Front 25

T/F Index mutual funds have generally outperformed non-index funds with similar goals.

Back 25

True

Front 26

T/F Getting expansion money and ownership disposal is easier for a corporation than for non-corporations.

Back 26

True

Front 27

T/F Getting expansion money and ownership disposal is harder for a corporation than for a non-corporation.

Back 27

False

Front 28

T/F Getting expansion money and ownerships disposal is easier for a non-corporation than a corporation.

Back 28

False

Front 29

T/F Earnings and the impact of new products are believed to be useful in predicting future stock prices using the technical approach to forecasting stock prices.

Back 29

False

Front 30

T/F An open end mutual fund has no fixed number of shares and its price is net asset value.

Back 30

True

Front 31

T/F The demand for gas and salt is likely elastic because both goods have few substitutes.

Back 31

False

Front 32

T/F A non index fund attempts to outperform whatever is bench mark (an index) is.

Back 32

True

Front 33

T/F An investor generally finds preferred stock that is non-cumulative and non-convertible more desirable than cumulative and convertible preferred stock.

Back 33

False

Front 34

T/F Diversification is a key reason to own a mutual fund rather than individual stocks.

Back 34

True

Front 35

T/F Diversification is a key reason to own individual stocks rather than mutual funds.

Back 35

False

Front 36

T/F When a new stock is issue is underwritten an investment banker sells you new stock it bought from the corporation.

Back 36

True

Front 37

T/F The demand for the british pounds in currency market reflects the British demand for goods of other countries.

Back 37

False

Front 38

T/F The demand of the british pound in currency market reflects the demand for British goods.

Back 38

True

Front 39

What are the 3 sciences conceded with economics?

Back 39

Production

Distribution

Consumption

Front 40

Define production.

Back 40

Creates utility

Front 41

What is an example of production?

Back 41

Auto assembly line

Front 42

What does distribution create?

Back 42

Distribution creates utility.

Front 43

What is an example of distribution?

Back 43

Its any change in ownership and location.

Front 44

What does consumption destroy?

Back 44

Consumption destroys utility.

Front 45

What is an example of consumption?

Back 45

Driving a car.

Front 46

How should you view economics?

Back 46

Economics is the science concerned with the allocation of scarce resources to satisfy unlimited wants.

Front 47

What are the 4 scarce resources in economics?

Back 47

Land

Labor

Capital

Risk taker

Front 48

Define land as it refers to one of the scarce resources of economics.

Back 48

Raw land plus natural resources such as coal, oil, and water.

Front 49

Define labor as it pertains to the four resources of economics.

Back 49

Those 16 and older who are employed or want to be employed.

Front 50

Define risk taker as the pertain to the four scarce resources of economics.

Back 50

One who uses quantities of land, labor, and capital to produce goods for profit.

Front 51

Wat is the difference between economic and free goods?

Back 51

Economic goods are scarce (cost something) where free are not scarce (goods cost nothing).

Front 52

Define utility

Back 52

Something that is useful.

Front 53

Define consumer goods.

Back 53

Directly satisfy our wants.

Front 54

What are examples of consumer goods

Back 54

Car and food.

Front 55

Define capital goods.

Back 55

Capital goods are the plants and equipment used to produce consumer goods.

Front 56

What are the 2 investment types.

Back 56

Economic and Financial.

Front 57

What is an economical investment?

Back 57

Capital goods that are acquired by a firm.

Front 58

What is a Financial investment?

Back 58

Financial assets are stocks, bonds, CD's, mutual funds, act that are acquired by an individual or firm.

Front 59

What are the 3 goals of the employment act of 1946?

Back 59

Full Employment, Stable Prices, and Growth.

Front 60

Define Full employment.

Back 60

Full employment is never zero unemployed. The unskilled and people between employment are considered. Full employment is somewhere between 4 and 8%.

Front 61

Define Stable Price.

Back 61

Prices (CPI) rise no more than 2-3% yearly.

Front 62

What does CPI stand for?

Back 62

Consumer Price Index

Front 63

Define Inflation

Back 63

A period when prices are generally rising.

Front 64

Define Deflation.

Back 64

A period when prices are generally falling.

Front 65

Define growth.

Back 65

Increase of a nation's output of good and services.

Front 66

Define Balance of payments.

Back 66

Record of finical transactions between the United States and all other nations.

Front 67

What are the 3 current accounts that financial transactions fall into?

Back 67

Exports/imports, Income from foreign investments, and tourism/economic aid.

Front 68

What are the 2 accounts that finical actions go into?

Back 68

Current, or capital accounts

Front 69

What are the 2 capital accounts of finical transactions?

Back 69

Direct foreign investment, and indirect foreign investment.

Front 70

Define direct foreign investments.

Back 70

A firm builds a capital investment in a foreign country.

Front 71

What is an example of a foreign investment?

Back 71

GM building a factory in canada or Honda in the US.

Front 72

Define indirect foreign investment.

Back 72

A person or firm buys stocks or bonds of a foreign company.

Front 73

What is an example of a indirect foreign investment?

Back 73

If I was to buy stock in Honda.

Front 74

Define Exports

Back 74

The money flow contributes to a U.S. surplus when money flows is from the foreign nation into the United States.

Front 75

Define Imports.

Back 75

The money flow contributes to a U.S. deficit when the flow is from the united states into a foreign nation.

Front 76

Why do trade deficits matter?

Back 76

They create a weaker economic growth of a nation.

Front 77

What are the 2 currency prices?

Back 77

Fixed and market set.

Front 78

Define fixed currency prices.

Back 78

Gold Standard (half a century before the depression.)

Front 79

When was the gold standard of currency prices?

Back 79

The Bretton Woods Era.

Front 80

Define Market Set.

Back 80

Supply and Demand

Front 81

T/F Market set pricing has been in effect since 1971 and is still in effect today.

Back 81

True

Front 82

What was the goal of the Bretton Woods Agreement?

Back 82

To increase the volume of world trade

Front 83

What were the obligations of the Bretton Woods era?

Back 83

The U.S. returned to a gold standard and foreign nations agreed to keep the prices of their currencies fixed versus the dollar.

Front 84

In the 1960's the U.S. had 2 steps to reduce overall deficits. What are they?

Back 84

Reduce the inflation rate and reduce our direct/indirect foreign investment.

Front 85

Define currency devaluation.

Back 85

A currency's fixed price is decreased causing the nation's exports to rise and imports to fall.

Front 86

Define currency revaluation.

Back 86

A currency's fixed price is increased causing imports to rise and exports to fall.

Front 87

T/F In a currency's devaluation nations exports rise and imports fall.

Back 87

True

Front 88

T/F In a currency's devaluation nations exports and imports both fall.

Back 88

False

Front 89

T/F in a currency's revaluation a nations imports rise and exports fall.

Back 89

True

Front 90

T/F In a currency's revaluation a nations imports fall and exports rise.

Back 90

False

Front 91

Define absolute advantage trade theory.

Back 91

A nation can produce a good using fewer resources than another nation.

Front 92

Define comparative advantage trade theory.

Back 92

A nation has one either where its absolute advantage is greatest or where its disadvantage is least.

Front 93

Define wants.

Back 93

Wants are the things we wish for or we desire.

Front 94

T/F Wants are the things we wish for or we desire.

Back 94

True

Front 95

Define demands.

Back 95

Demands are those things we have both money and willingness to spend it.

Front 96

T/F Firms seeking profit have an incentive to supply the goods in greatest demand.

Back 96

True

Front 97

T/F Firms seeking profit have the incentive to supply the goods in least demand.

Back 97

False

Front 98

T/F if firms want to maximize profit they must use the least cost method possible.

Back 98

True

Front 99

Define equilibrium price.

Back 99

That price at which quantity bought equals quantity offered.

Front 100

Define excess surplus.

Back 100

A condition that exists at prices where quantity offered exceeds quantity bought and it causes prices to fall.

Front 101

T/F If a company has excess supplies the prices will fall above equilibrium.

Back 101

True

Front 102

T/F If a company has excess supplies the prices will fall above the equilibrium.

Back 102

False

Front 103

Define Excess demand.

Back 103

A condition that exists at prices where quantity bought exceeds quantity offered and it causes prices to rise.

Front 104

T/F Excess demand causes prices to rise.

Back 104

True

Front 105

T/F Excess demand causes prices to fall.

Back 105

False

Front 106

T/F Price is below the equilibrium when there is excess demand.

Back 106

True

Front 107

T/F Price is above the equilibrium when there is excess demand.

Back 107

False

Front 108

Define an increase in the change of demand.

Back 108

A larger quantity is bought at each price.

Front 109

In an increase of demand which way does the line shift.

Back 109

The demand line shifts rightward.

Front 110

Define a decrease in a change of demand.

Back 110

A smaller quantity is bought at each price.

Front 111

Which way does the line shrift in a decrease of change of demand?

Back 111

The line shifts leftward.

Front 112

What are some causes of demand change?

Back 112

Taste changes, satisfaction, Income changes, price changes, price changes of other goods.

Front 113

Define quantity demand change.

Back 113

Movement along a given demand line caused by an increase or decrease in the price of the good.

Front 114

Define Substitute Goods

Back 114

If the price of one good (beef) increases or decreases the demand for the substitute good (pork) changes in the same direction.

Front 115

T/F If the price of one good increases or decreases the substitute good will change in the same direction.

Back 115

True

Front 116

T/F If the price of on good increases or decreases the substitute good will change in the opposite direction.

Back 116

False

Front 117

Define Complement goods.

Back 117

If the price of one good (bacon) rises or falls the demand for the complement good (eggs) changes in the opposite direction.

Front 118

Define Supply change.

Back 118

Same as increase or decrease in demand changes except it is the quantity offered not quantity bought.

Front 119

Define elasticity.

Back 119

A measure of the responsiveness of quantity demand to a price change.

Front 120

T/F Elastic products have many substitutes.

Back 120

True

Front 121

T/F Elastic products have few substitutes.

Back 121

False

Front 122

T/F Inelastic products have few substitutes.

Back 122

True

Front 123

T/F Inelastic products have many substitutes.

Back 123

False

Front 124

T/F Beef is an example of a elastic product.

Back 124

True

Front 125

T/F beef is an example of a inelastic product.

Back 125

False

Front 126

T/F Gas is an example of a inelastic product.

Back 126

True

Front 127

T/F Gas is an example of a elastic product.

Back 127

False

Front 128

T/F Deficit transactions create a demand for foreign currency.

Back 128

True

Front 129

T/F Deficit transactions create a supply of foreign currency.

Back 129

False

Front 130

T/F Surplus transactions create a supply of foreign currency.

Back 130

True

Front 131

T/F Surplus transactions create a demand for forge in currency.

Back 131

False

Front 132

What do deficit transactions create.

Back 132

Create a demand for foreign currency.

Front 133

What do surplus transactions create?

Back 133

They create a surplus of foreign currency.

Front 134

Define forms proprietorship.

Back 134

One person owns and operates the firm.

Front 135

T/F Forms proprietorships are the most common.

Back 135

True

Front 136

T/F Forms proprietorships are the least common.

Back 136

False

Front 137

Define a partnership.

Back 137

Two or more persons own and operate the firm.

Front 138

T/F Partnership is the least common form of a business organization.

Back 138

True

Front 139

T/F Partnership is the most common form of a business organization.

Back 139

False

Front 140

Define a corporation.

Back 140

A firm that is separate (from its owners) legal entity.

Front 141

What is a call?

Back 141

The right to buy shares of a stock at a fixed price during a fixed time period.

Front 142

What is the put?

Back 142

The opposite of a call, except the right to sell at a fixed price for a fixed period of time.

Front 143

What are the benefits of cal-put optionsl?

Back 143

Potential profit is large while potential loss is limited to the cost of the option.

Front 144

What are the disadvantages of call-put options?

Back 144

Loss can occur even if the stock rises (call), or if the stock falls (put).

Front 145

Define covered call sellers.

Back 145

Covered sellers own the stock and will profit if the stock does not fall.

Front 146

Define uncovered call sellers.

Back 146

Uncovered call sellers do not own the stock and risk losses if the stocks' price rises too much.

Front 147

What is the difference between a covered call seller and an uncovered call seller?

Back 147

Covered call sellers own the stock and profit if the stock does not fall and uncovered call sellers doe not own the stock and risk loses if the stock rises.

Front 148

Define straddle.

Back 148

They are option strategies that may yield a profit regardless of whether the price of the stock rises or fall.

Front 149

When do you sell a straddle?

Back 149

When little change is expected.

Front 150

T/F In a straddle an investor buys 1 call + 1 put.

Back 150

True

Front 151

T/F In a straddle an investor buys 2 different calls or puts.

Back 151

False

Front 152

T/F In a spread an investor buys 2 different calls or puts.

Back 152

True

Front 153

T/F In a spread an investor buys 1 call + 1 Put.

Back 153

False

Front 154

What does money supply consist of?

Back 154

Checkable deposits and currency in circulation.

Front 155

What does near money consist of?

Back 155

Savings deposits, savings bonds, and treasury (T) bills.

Front 156

T/F Near money is anything that is both highly liquid and risk less and is not part of the money supply.

Back 156

True

Front 157

T/F Barter is the exchange of one good for another.

Back 157

True

Front 158

Define assets.

Back 158

Assets are the items of value that we own

Front 159

Define liabilities.

Back 159

Liabilities are what is owed.

Front 160

What is the difference between assets and liabilities?

Back 160

Assets are owned and liabilities are what is owed.

Front 161

Define fractional reserve banking.

Back 161

Banks must hold assets called primary reserves equal to a fraction of their deposits.

Front 162

Define primary reserves.

Back 162

Assets which increase when a bank's deposits increase and vice versa.

Front 163

Primary reserves are either...

Back 163

Required or excess reserves.

Front 164

What is a required reserve?

Back 164

A reserve a bank must hold as backing for its deposits.

Front 165

What is an excess reserve?

Back 165

A reserve that may be lent or invest to produce interest income.

Front 166

What is a secondary reserve?

Back 166

Bonds a bank has purchased with its excess reserve.

Front 167

How is maximum change computed?

Back 167

Initial reserve change X credit multiplier = Max change.

Front 168

T/F When a bank makes a loan it creates a checkable deposit (CD) which is money.

Back 168

True

Front 169

What does a bank have to do to achieve maximun increase?

Back 169

Lend al their excess reserve and no leakage can occur.

Front 170

When does leakage occur in a bank?

Back 170

When a check drawn on a newly created deposit is not fully deposited in another bank.

Front 171

How many federal reserve banks does the U.S. have?

Back 171

12

Front 172

Which federal bank district is Detroit located in?

Back 172

Chicago

Front 173

T/F Detroit is located in New Yorks Federal Bank district.

Back 173

False, Detroit is located in Chicagos district.

Front 174

Which federal bank district is the most important?

Back 174

New York

Front 175

T/F Chicago is the most important Federal Bank district.

Back 175

False, New York is the most important.

Front 176

Who runs the Federal reserve?

Back 176

The Fed is run by a 12 person board.

Front 177

Who picks the people to run the Federal Reserve?

Back 177

The President of the United Staes of America.

Front 178

T/F There is a 12 member council that runs advises the Fed.

Back 178

True

Front 179

What is the Fed's most important function?

Back 179

To manage the money supply.

Front 180

T/F The Fed is semi-independant.

Back 180

True

Front 181

T/F The Fed is the banker for the Federal Government.

Back 181

True

Front 182

T/F The Fed lends reserves to banks that are reserve deficient.

Back 182

True

Front 183

Who do the Feds lend money to?

Back 183

Banks that are reserve deficient.

Front 184

What causes the economy to expand or produce more and contract or produce less?

Back 184

The Keynesian cause and the Monetarist cause.

Front 185

What is the Keynesian cause?

Back 185

Its spreading vs. production

Front 186

What is the monetarist cause?

Back 186

Money supply change.