Economics 2

Question 1

How does a bank work?

Answer 1

Banks work by paying its customers to make deposits. The depositing customer gains a small amount of money in return (interest on savings), and the lending customer pays a larger amount of money to the bank in return (interest on loans). To make money for itself, the bank keeps the difference.

Question 2

Why do banks make loans?

Answer 2

Banks make a loan (lend money) and the borrower must pay back the money they loaned plus interest. The interest is part of how the bank makes money.

Question 3

How do banks make money?

Answer 3

Banks charge higher interest to the borrower than they payout to the depositor.

Question 4

How does a bank get money?

Answer 4

People deposit money in the bank, and are paid interest for leaving the money there. (The money is safe too!)

Question 5

How do banks use money?

Answer 5

Banks use your money & the money of others (deposits) to make loans.

Question 6

What is a deposit?

Answer 6

money put into a bank

Question 7

What is a withdrawal?

Answer 7

money taken out of a bank

Question 8

What is interest?

Answer 8

Money paid for the use of someone else’s money

Question 9

What is a checking account?

Answer 9

the type of banking account that allows people to deposit money and use that money by writing a check (check can be paper or done by a computer)

Question 10

What is a check?

Answer 10

Checks are pieces of paper that promise you will pay the amount written on that check

Question 11

How do you make sure a check will clear or is good?

Answer 11

You must have enough money in your checking account to pay for every check you write or you will “bounce” the check. Which means you will not be able to cover what you promised.

Question 12

What is a debit card?

Answer 12

a debit card looks like a credit card but works like a check

Question 13

What is a ATM?

Answer 13

Automated teller machine

Question 14

What does an ATM do?

Answer 14

ATM allows you to remove money from your account without you going into the bank.

Question 15

What is a credit card?

Answer 15

a plastic card with an account number that lets you buy something now and pay for it later

Question 16

How do you repay credit cards?

Answer 16

a person (the cardholder) receives a bill at the end of the month telling how much was spent
*people charge over a trillion dollars each year*

Question 17

What is a credit card bill?

Answer 17

a bill is a statement of what you bought and how much you owe

Question 18

What is credit card interest?

Answer 18

If the entire amount (balance) is not paid you begin to pay interest on the balance (outstanding amount). You can be charged from 9 - 23% each month.

Question 19

What is a balance?

Answer 19

Balance is the amount unpaid on your bill or it can also mean the money left in a bank account.

Question 20

Credit card minimum payment is

Answer 20

2-4% of your balance

Question 21

Example of a bank issued credit card:

Answer 21

VISA, MasterCard, Disover

Question 22

Example of store issued credit cards:

Answer 22

Target card, Macy’s card, GAP card

Question 23

VISA, MasterCard, Discover, & American Express charge what to stores?

Answer 23

a transaction fee (3%); a transaction fee is on every check out

Question 24

What is a transaction?

Answer 24

When you purchase something.

Question 25

Examples of loans:

Answer 25

Mortgage or Car Loan

Question 26

Mortgage is

Answer 26

a loan to buy a house; usually paid back in 15 or 30 years

Question 27

Car loan is

Answer 27

a loan used to buy a car, paid back in 5 years or less.

Question 28

Bank has a _______ agains your house or car until all money is repaid.

Answer 28

lien

Question 29

What is a lien?

Answer 29

The legal right to the property (that has the loan on it) until the loan is paid in full.

Question 30

Foreclose or repossess means

Answer 30

the lien holder or can take back the property if you do not pay the money you owe

Question 31

Collateral is

Answer 31

what you offer the bank to show that you will repay the loan. In the case of a car loan the car is used as collateral.

Question 32

Stock is

Answer 32

ownership of a piece of a company (shares).

Question 33

Shareholders may

Answer 33

buy and sell shares.

Question 34

What happens when companies make profits and you own stock in that company?

Answer 34

when companies make profits they pay dividends to shareholders or use the money to help that business grow

Question 35

What does NYSE stand for?

Answer 35

New York Stock Exchange

Question 36

NYSE lists….

Answer 36

more than 2200 companies

Question 37

What is a bull market?

Answer 37

when the price of stock is up (high)

Question 38

What is a bear market?

Answer 38

when the price of stock is down (low)

Question 39

Contracts are______

Answer 39

promises between groups in which each side offers the other “considerations”

Question 40

Quid pro quo is Latin and means

Answer 40

“something for something”

Question 41

Contracts are usually between an ____________ and ____________.

Answer 41

employer and employee

Question 42

Employer is usually_________________

Answer 42

the company that offers money and benefits.

Question 43

Employee is ___________________________

Answer 43

the person who offers his/her labor for money and benefits.