Money, Banking and Finance Test

Question 1

What is money?

Answer 1

anything people will accept in exchange for goods and services.

Question 2

Describe Medium of exchange.

Answer 2

-medium of exchange: allows for the precise and flexible pricing of goods and services; makes transactions convenient

Question 3

What are the physical characteristics of money?

Answer 3

Durable, portable, divisible, and uniformity

Question 4

What are the economic characteristics of money?

Answer 4

stability of value, scarcity, and acceptability

Question 5

What are savings?

Answer 5

-income that is not used for consumption and allows you to save money for future expenses

Question 6

What is the difference between saving and investment?

Answer 6

• Saving is income that is not used for consumption, it is saved up and added up over time to buy a particular product or service. It is not used for anything else.
• Investments is the use of income today for future benefit

Question 7

What are stock indexes?

Answer 7

measure and report the change in prices of stocks and health of the market

Question 8

What characterizes a bull market?

Answer 8

prices steadily rise

Question 9

What characterizes a bear market?

Answer 9

prices steadily decline

Question 10

What is a stock exchange?

Answer 10

A market in which securities are bought and sold

- the level of prices in a stock market

Question 11

What is a mutual fund?

Answer 11

investment company gathers money from individual investors and purchases a wide range of financial assets

Question 12

What is included in M1?

Answer 12

all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts (not 100% sure about this one)

Question 13

What is included in M2?

Answer 13

savings deposits, money market mutual funds and other time deposits, (not 100% sure about this one)

Question 14

What is a timed deposit?

Answer 14

savings in a financial institution for a specific period of time

Question 15

What is the most common type of timed deposit?

Answer 15

(CDs) Certificates of Deposit

Question 16

What are credit unions?

Answer 16

cooperative saving and lending institutions that specialize in home mortgage and auto loans.

Question 17

What are the three functions of money?

Answer 17

Medium of Exchange, Store of Value, and Standard of Value(unit of account)

Question 18

Describe Store of Value

Answer 18

something that holds its value over time; can be stored and accepted wherever/whenever it is presented

Question 19

Describe Standard of Value

Answer 19

determines the economic worth in the exchange process; measures the relative costs of goods and services