Unit 4: Money, Money, Money Review

Before the development of money as a medium, which was used by people to exchange goods?

• barter system

• financial system

• stock market

• venture capital

Which most accurately explains why fiat money differs from commodity money?

• Fiat money can also be used as a productive input.

• Fiat money has value because it is a precious metal such as gold.

• Fiat money only has value as a medium of exchange.

• Fiat money has value because it enables the barter system to work.

Which best describes why banks aren't allowed to loan out all of their deposits at once?

• If banks loaned out all of their deposits, it would be impossible to meet customers' demands for withdrawals.

• If banks loaned out all of their deposits, the government would be unable to calculate the bank's tax burden.

• If banks loaned out all of their deposits, there wouldn't be enough money left to provide new customers with loans.

• If banks loaned out all of their deposits, the money supply would grow much too slowly.

Which is the purpose of the Federal Reserve Bank?

• protect bank depositors against losing their money

• manage the growth (the ups and downs) of the U.S. economy

• prevent stock market fraud

• issue government bonds

Which accurately describes how lowering the required reserve ratio increases the money supply?

• When the required reserve ratio is lowered, banks can loan out more money.

• When the required reserve ratio is lowered, banks make less profit on money loaned out.

• When the required reserve ratio is lowered, the inflation rate goes up and people spend less money.

• When the required reserve ratio is lowered, banks charge lower interest rates that make loans more affordable.

Which best explains why the money supply is decreased when the government issues bonds?

• The purchase of bonds reduces the bond buyers' bank accounts.

• The sale of bonds enables the government to run a budget surplus.

• The issuing of bonds increases competition among private banks.

• The trading of bonds interferes with other types of economic activity.

Which is an example of a businessman making an investment?

• he receives financing from an angel investor

• he contributes money to a partnership

• he applies for a small business loan

• he reports investor fraud to the Federal Reserve

Which is a risk of being a stockholder?

• may not get an increase in the amount of one's investment

• can increase investment if the price of one's stock goes up

• might receive dividends when the company makes a profit

• able to vote for members of the board of directors

Which is traded in a stock market?

• foreign money

• unprocessed goods

• shares in corporations

• treasuries

What best describes the kinds of companies in which a socially responsible investor would invest his or her money?

• companies that rely on nonmonetary calculations when doing cost-benefit analysis

• companies that work toward decreasing marginal utility for a society

• companies that put profit-maximization above all other considerations

• companies with a business model and social mission that the investor supports