4/3 EC Econ CH11

What is the best explanation for why saving money helps promote economic growth?

• People earn interest on the money they save.

• Saving helps ensure that companies meet payroll.

• Money saved is money that businesses can borrow to grow.

• Saving allows the government to contribute to retirement funds.

In the circular flow of money in the financial system, life insurance companies and pension funds are examples of _________.

• savers

• borrowers

• financial assets

• financial intermediaries

How does a credit union differ from a bank?

• A credit union makes loans.

• A credit union is a nonprofit service cooperative.

• A credit union is open to any interested consumer.

• A credit union offers checking and saving accounts.

What basic investment strategy are you considering when you spend $1,000 to buy 100 shares of 10 different stocks rather than spending $1,000 to buy 1,000 shares of a single stock?

• simplicity

• consistency

• diversification

• investment objectives

Which type of investment comes with the highest risk and the highest potential return?

• common stock

• preferred stock

• U.S. Treasury bills

• investment-grade bonds

While money and capital markets differ in length of maturity, primary and secondary markets differ in __________.

• liquidity

• par value

• coupon rate

• bond ratings

What do the Dow Jones Industrial Average and the Standard & Poor’s 500 have in common?

• They are securities exchanges.

• They calculate mathematical averages of stock prices.

• They provide indicators of overall market performance.

• They look at the average closing price of 500 active stocks.

Three ways people can save money with little risk include _____.

• having a savings account, buying stock, buying certificates of deposit

• buying an insurance policy, contributing to a pension fund, buying stock

• having a savings account, buying certificates of deposit, buying an insurance policy

• buying an insurance policy, contributing to a finance company, buying certificates of deposit

Investment analysts recommend people to make investments in ____.

• financial investments that promise the highest returns

• financial investments that are financially complicated

• financial investments recommended to them by friends

• financial investments they understand

Who issues tax exempt municipal bonds?

• local commercial banks

• local credit unions

• state and local governments

• federal and state governments