WorksheetsEconomics Chapter 6 Quiz V2
Total questions: 60
Worksheet time: 38mins
____________ is anything that serves as a medium of exchange, a unit of account, and a store of value.
Fiat
Currency Exchange
Money
Reserve Money
__________________is anything that is used to determine value during the exchange of goods and services.
Medium of Exchange
Monetary Policy
Interest
Portfolio
____________________consists of objects that have value in and of themselves and that are also used as money.
Reserve Notes
Representative Money
Fiat Money
Commodity Money
____________________ makes use of objects that have value solely because the holder can exchange them for something else of value. For example, if you give an IOU for $20, the piece of paper it’s written on is worth nothing, but your promise is worth $20. Another example is a paper receipt for a gold or silver deposit.
Traded Money
Representative Money
Commodity Money
Exchange Money
______________, also called “legal tender,” has value because a government has decreed that it is an acceptable means to pay debts. The Federal Reserve Note is valuable because our government backs it.
Currency Money
Reserve Money
Fiat Money
Transparent Money
_____________ refers to the actions that the Fed takes to influence the level of real Gross Domestic Product (GDP) and the rate of inflation in the economy.
Fed Funds Policy
Monetary Policy
Exchange Policy
Reserve Policy
____________ are deposits that a bank keeps readily available as opposed to lending them out.
Discount Reserves
Overnight Reserves
Fed Funds
Reserves
__________________ are the amount of reserves that banks are required to keep on hand.
Reserve Requirements
Federal Bank Guidelines
Lending Requirements
Money Supply reserves
Banks also borrow from the Federal Reserve, especially in financial emergencies such as recessions. The Fed acts as a lender of last resort, making emergency loans to commercial banks so that they can maintain required reserves. The rate the Federal Reserve charges for these loans is call the ___________________
Loan Rate
Discount Rate
Exchange Rate
Lender Rate
Under normal circumstances, banks lend each other money on a day-to-day basis, using money from their reserves balances. These funds are called federal funds. The interest rate that banks charge each other for these loans is call the ___________________
Treasury Exchange Rate
Bank Exchange Rate
Loan Funds Rate
Federal Funds Rate
Currency is money. So are traveler’s checks, checking account deposits, and a variety of other components. All these components make of the United States ____________ (all the money available in the Unites States economy).
Legal Tender
Federal Tender
Money Supply
Liquidity Supply
_______________ refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. In other words, how quickly you can get your hands on cash.
Demand Exchange
Glide Path
Acceleration
Liquidity
Funds in checking accounts are called _____________ because checks can be paid “on demand” at any time.
Demand Deposits
Money Deposits
Reserve Deposits
Exchange Deposits
___________ is the failure to repay a debt, including interest or principal, on a loan or security. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments.
Default
Forgiveness
Bankruptcy
Indebtedness
A ______________ is a specific type of loan that is used to buy real estate.
Mortgage
Real Estate Loan
Commercial Loan
Credit Lending Loan
_____________ is the price paid for the use of borrowed money.
Coupon Rate
Royalties
Interest
Dividends
____________________ are institutions that help channel funds from savers to borrowers. They include Banks, Savings & Loan Associations, Credit Unions, Mutual Funds, Hedge Funds, Life Insurance Companies, and Pension Funds.
Regulated Banks
Financial Intermediaries
Financial Guarantors
Broker/Dealers
A ____________ pools that savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets.
Hedge Fund
Closed-End Fund
Mutual Fund
Private Pool Fund
________________ is the strategy of spreading out investments to reduce risk.
Caution
Diversification
Downside Protection
Risk Mitigation
A ____________ is a collection of financial assets.
Private Placement
Commingled Trust
Collective Trust
Portfolio
_____________ is the money the investor receives above and beyond the sum of money that has been invested.
Net Result
Dividend Payout
Return
Return of Capital
_____________ is the interest rate that a bond issuer will pay to a bondholder.
Coupon Rate
Bond Rate
LIBOR
Par Rate
The time at which payment to a bondholder is due is called the bond’s ______________.
Gain Period
Payment End
End of Term
Maturity
A bond’s ____________, assigned by the issuer, is the amount to be paid to the bondholder at maturity. Par value is also called face value or principal.
Par Value
Coupon Value
Excess Value
Maturity Value
______________ are issued by State and local governments and municipalities to finance such projects as highways, state buildings, libraries, parks, and schools.
County Bonds
Municipal Bonds
City Bonds
Treasury Notes
Bonds with a fairly high risk of default but potentially high yield are known as ______________.
Coupon Bonds
Accredited Bonds
Default Bonds
Junk Bonds
A second way an investor can earn a profit is to sell the stock for more than he or she paid for it. The difference between the higher selling price and the lower purchase price is called a ________________.
Capital Gain
Capital Improvement
Stock Gain
Leverage Gain
A _________________ is a person who links buyers and sellers of stock. They usually work with individual investors, advising them to buy or sell stocks.
Stock Trustee
Portfolio Manager
Stock Trader
Stockbroker
True or False? The following are 6 characteristics of money:
· Durable – must withstand the physical wear and tear, can’t be easily worn out or destroyed
· Portable – Take it with you easily, transfer it to another person easily
· Divisible – Easily divided into smaller denominations
· Uniform – Any two units of money must be the same, measure and count accurately
· Limited Supply – Federal Reserve keeps the right amount of money available
· Acceptable as a form of payment – Every person or business will accept it
(a)
What are the 5 types of financial institutions?
Insurance Company
Savings & Loan
Savings Banks
Credit Union
Finance Companies
Commercial Banks
Savings & Loan
Savings Banks
Hedge Fund
Finance Companies
Commercial Banks
Savings & Loan
Savings Banks
Credit Union
Finance Companies
Retail Banks
Savings & Loan
Savings Banks
Credit Union
Finance Companies
Commercial banks:
Serve business (i.e., checking, savings, loans, etc.)
Originally formed to loan money for building homes
Originally formed to cater to small deposit customers
Make installment loans to consumers (high interest rate loans)
Savings and Loans:
Originally formed to cater to small deposit customers
Serve businesses (i.e., savings, checking, loans, etc.)
Originally formed to loan money for building homes. Also called "thrifts."
Cooperative lending associations for a specific group
Savings Banks:
Originally formed to cater to small deposit customers. Initially called "mutual savings banks."
Serve businesses (i.e., savings, checking, loans, etc.)
Cooperative lending associations for a specific group
Make installment loans to consumers (high interest rate loans)
Credit Unions:
Originally formed to loan money for building homes
Originally formed to cater to small deposit customers
Make installment loans to consumers (high interest rate loans)
Cooperative lending associations - usually a specific firm or Govt. agency (i.e., Teacher's Credit Union, etc.)
Finance Companies:
Make installment loans to consumers (high interest rate loans)
Cooperative lending associations for a specific group
Serve businesses (i.e., savings, checking, loans, etc.)
Originally formed to loan money for building homes
True or False?
Commodity Money consists of objects that have value in and of themselves and that are also used as money (i.e., precious gems, cattle, salt, etc.)
(a)
True or False?
Representative Money makes use of objects that have value solely because the holder can exchange them for something else of value. For example, if you give an IOU for $20, the piece of paper it’s written on is worth nothing, but your promise is worth $20. Another example is a paper receipt for a gold or silver deposit.
(a)
True or False?
Fiat Money also called “legal tender,” has value because a government has decreed that it is an acceptable means to pay debts. The Federal Reserve Note is valuable because our government backs it.
(a)
What are the 3 sources of money's value?
Currency Money
Legal Tender Money
Fiat Money
Commodity Money
Representative Money
Fiat Money
Bank Money
Representative Money
Fiat Money
Commodity Money
Representative Money
Treasury Money
True or False?
Money supply in the U.S. is measured through:
M1 represents money that people can gain access to easily and immediately. It consists of assets that have liquidity (45% is currency, 37% checking account deposits…)
M2 consists of all assets in M1 plus several other asset classes (quickly or nearly liquid, but not immediately liquid). Savings accounts, money market funds, etc.
(a)
What are the functions of financial institutions (banks)?
Store Money
Saving Money
Making Loans
Mortgages
Credit Cards
Store Money
Create Money
Making Loans
Mortgages
Debit Cards
Deposit Money
Saving Money
Making Loans
Mortgages
Credit Cards
Store Money
Saving Money
Making Loans
Commercial Loans
Credit Cards
True or False? The functions of financial institutions (banks) are:
Storing money – keeps it safe, FDIC insured
Saving money – Earn interest through savings accounts
Making loans – Help people acquire things they can’t afford right away
Mortgages – Help people buy homes
Credit cards – Allows people to buy goods and services based on their promise to pay
(a)
True or False? What is the role of financial intermediaries?
Financial intermediaries are institutions that help channel funds from savers to borrowers (“in between” the two). They include Banks, Savings & Loan Associations, Credit Unions, Mutual Funds, Hedge Funds, Life Insurance Companies, and Pension Funds.
(a)
Which of the following in NOT an example of a financial intermediary?
Life Insurance Companies
Securities & Exchange Commission
Banks
Credit Union
Would you rather invest your savings in a low risk/low return investment or a high risk/high return investment? – Is the answer below Correct or Incorrect?
This is a case of weighing the potential risk and potential reward of each investment. The risk/return trade-off is called the ‘ability-to-sleep-at-night’ test. I would place my savings into a low risk/low return investment if I had a short investment horizon and wanted stability of my capital. In contrast, I would place my savings into a high risk/high return investment if I had a long time horizon and I was comfortable seeing the value of my investment fluctuate.
(a)
What are two benefits of buying stocks?
Dividends
Capital Gain
Dividends
Short-Term Tax Rate
M1 Liquidity
Dividends
Tax Free Earnings
Capital Gains
What are the two types of capital markets?
Commercial Markets (money lent for > 1 year)
Money Markets (money lent for < 1 year)
Capital Markets (money lent for > 1 year)
Cash Markets (money lent for < 1 year)
Capital Markets (money lent for > 1 year)
Money Markets (money lent for < 1 year)
Federal Markets (money lent for > 1 year)
Money Markets (money lent for < 1 year)
What are the different types of bonds?
Savings
Treasury, Bills, Notes
Municipal
Corporate
Junk
Savings
Treasury, Bills, Notes
Municipal
Corporate
Low Quality
Savings
Treasury, Bills, Notes
State
Corporate
Junk
Bank
Treasury, Bills, Notes
Municipal
Corporate
Junk
Savings Bonds:
High risk of default but potentially high yield, risky
Issued by corporations, guaranteed by the company not the U.S. Govt
Issued by State and local governments to pay for public works projects
Low denomination ($50-$10,000) issued by U.S. Government to pay for public works projects
Treasury Bonds, Bills, and Notes:
Low denomination ($50-$10,000) issued by U.S. Government to pay for public works projects
Issued by U.S. Govt, safest in terms of default risk
Issued by State and local governments to pay for public works projects
High risk of default but potentially high yield, risky
Municipal Bonds:
Issued by State and local governments to pay for public works projects
Issued by corporations, guaranteed by the company not the U.S. Govt
Low denomination ($50-$10,000) issued by U.S. Government to pay for public works projects
Issued by U.S. Govt, safest in terms of default risk
Corporate Bonds
Issued by corporations, guaranteed by the company not the U.S. Govt
Low denomination ($50-$10,000) issued by U.S. Government to pay for public works projects
Issued by State and local governments to pay for public works projects
Issued by U.S. Govt, safest in terms of default risk
Junk Bonds:
Issued by U.S. Govt, high chance of default risk
High risk of default but potentially high yield, risky
Issued by U.S. Govt, safest in terms of default risk
Issued by State and local governments to pay for public works projects
True or False?
Exchange Money makes use of objects that have value solely because the holder can exchange them for something else of value. For example, if you give an IOU for $20, the piece of paper it’s written on is worth nothing, but your promise is worth $20. Another example is a paper receipt for a gold or silver deposit.
(a)
True or False? The following are 6 characteristics of money:
· Pliable – must withstand the physical wear and tear, can’t be easily worn out or destroyed
· Portable – Take it with you easily, transfer it to another person easily
· Divisible – Easily divided into smaller denominations
· Uniform – Any two units of money must be the same, measure and count accurately
· Limited Supply – Federal Reserve keeps the right amount of money available
· Acceptable as a form of payment – Every person or business will accept it
(a)
True or False?
Cash Money also called “legal tender,” has value because a government has decreed that it is an acceptable means to pay debts. The Federal Reserve Note is valuable because our government backs it.
(a)
True or False? What is the role of financial intermediaries?
Financial intermediaries are institutions that help channel funds from savers to borrowers (“in between” the two). They include Crypto Currency, Credit Unions, Mutual Funds, Hedge Funds, Life Insurance Companies, and Pension Funds.
(a)
True or False?
Money supply in the U.S. is measured through:
M1 consists of asset classes that are quickly or nearly liquid, but not immediately liquid. Savings accounts, money market funds, etc.
M2 represents money that people can gain access to easily and immediately. It consists of assets that have liquidity (45% is currency, 37% checking account deposits…)
(a)
Would you rather invest your savings in a low risk/low return investment or a high risk/high return investment? – Is the answer below Correct or Incorrect?
This is a case of weighing the potential risk and potential reward of each investment. The risk/return trade-off is called the ‘ability-to-sleep-at-night’ test. I would place my savings into a low risk/low return investment if I had a long investment horizon and didn't want stability of my capital. In contrast, I would place my savings into a high risk/high return investment if I had a short time horizon and I wasn't comfortable seeing the value of my investment fluctuate.
(a)
True or False? The functions of financial institutions (banks) are:
Storing money – keeps it safe, FDIC insured
Saving money – Earn interest through savings accounts
Making loans – Help people acquire things they can’t afford right away
Mortgages – Help people buy homes
E-Finance – Exchange crypto currencies into U.S. Dollars
(a)
