Macroeconomics Unit 4: Financial Assets Quiz

What are the three primary functions of money?

• Store of value, investment, savings

• Medium of exchange, unit of account, investment

• Unit of account, savings, investment

• Medium of exchange, unit of account, store of value

Which of the following is an example of commodity money?

• Traveler's checks

• Gold

• Paper currency

• Digital currency

What distinguishes fiat money from commodity money?

• Fiat money can be used for other purposes

• Fiat money's value is based on government decree

• Fiat money is backed by physical goods

• Fiat money has intrinsic value

What is included in M1 money supply?

• Real estate and stocks

• Savings accounts and CDs

• Bonds and mutual funds

• Currency in circulation and checkable deposits

Why are savings accounts considered part of M2 but not M1?

• They are not considered money

• They are not used for transactions

• They are not backed by the government

• They are not liquid

What is the relationship between interest rates and bond prices?

• Inverse relationship

• Proportional relationship

• No relationship

• Direct relationship

Which of the following is true about stocks?

• They represent a loan to a company

• They offer fixed interest payments

• They represent ownership in a company

• They are less risky than bonds

What is a key reason to invest in stocks and bonds instead of keeping money in a checking account?

• They are easier to access

• They offer higher potential returns

• They are more liquid

• They are safer

What should you consider when deciding how to manage a large sum of money?

• Only keep it as cash

• Only invest in stocks

• Invest in a mix of assets

• Only invest in real estate

Why is understanding economics important for personal finance?

• It provides specific investment advice

• It helps understand the foundation of financial decisions

• It replaces the need for a financial advisor

• It guarantees financial success