Test 1

Question 1

money

Answer 1

anything accepted in exchange

Question 2

FIAT money

Answer 2

outside money created by the government

Question 3

good money

Answer 3

1) retain value over time
2) limited supply
3) widely accepted

Question 4

functions of money

Answer 4

1) medium of exchange
2) store of value
3) unit of acct
4) coincidence of needs

Question 5

medium of exchange

Answer 5

has to be widely accepted

Question 6

store of value

Answer 6

retains value

Question 7

unit of acct

Answer 7

measure of value

Question 8

coincidence of needs

Answer 8

have to have what someone wants and vice cersa

Question 9

y = C + I + G + X

Answer 9

consumption
investments
government spending
net exports

Question 10

3 intermediaries

Answer 10

1) depository - comm banks
2) contractual - insurance
3) investment - mutual funds

Question 11

investment banks

Answer 11

underwrite (help create and sell new financial claims)

Question 12

broker

Answer 12

helps find security you want to buy

Question 13

dealer

Answer 13

sell it directly to you

Question 14

full line investment firms

Answer 14

companies that do all three (most banks)

Question 15

economies of scale

Answer 15

more we produce more we spread costs over and lowers cost

Question 16

economies of scope

Answer 16

branching out over a new mkt because its similar to mkt already in

Question 17

different kinds of financial claims

Answer 17

money (bigger, manage liquidity)

capital

Question 18

T. Bill

Answer 18

US government is borrower
short term
zero default risk

Question 19

commercial paper

Answer 19

large overnight loan between big companies

fin. co main source of fin.

Question 20

negotiable certificate of deposit

Answer 20

banks are borrowers

Question 21

Eurodollar

Answer 21

deposit in bank overseas but want to keep in dollars

Question 22

Repo (repurchase agreement)

Answer 22

someone buys a security and agrees to buy it back the same day

Question 23

Fed funds

Answer 23

deposit money at Fed Resurce

banks can lend to each other

Question 24

Bankers Acceptance

Answer 24

bank agrees to pay if individuals funds aren’t there

Question 25

stocks

Answer 25

can be traded
never matures
may get dividends, get share of co profits

Question 26

commercial bonds

Answer 26

repaid in a promise

if not paid is breach of contract

Question 27

agency bonds

Answer 27

private entity created by govt but is not part of govt

FNMA, GNMA, TVA

Question 28

organized mkt

Answer 28

physical location where people meet

Question 29

OTC mkt

Answer 29

people meet electronically

Question 30

capital

Answer 30

Stocks
Bonds
Agency Sec
T Bonds
Muni (int is tax free)

Question 31

mtg

Answer 31

real estate is collateral for loan

Question 32

Bear Stern

Answer 32

first private institution that went bankrupt

Question 33

Dodd Frank act

Answer 33

gave govt power to change contract

Question 34

mkt risk

Answer 34

1) risk (can borrower make PMTs)
2) Liq (how easy to get $ back before borrower finish paying)
3) tax
4) maturity (how long it takes to repay)
5) prices of other securities

Question 35

expected return

Answer 35

r* + pi + RP

Question 36

Prime rate loan

Answer 36

rate banks gives its best customers

Question 37

Discount window

Answer 37

Fed loans $ to the bank

Question 38

Leakages (slows down)

Answer 38

Tax
Savings
Imports

Question 39

Injections (speeds up econ)

Answer 39

Gov’t spending
Investing
Exports

Question 40

primary mkt

Answer 40

security sold for first time

Question 41

secondary mkt

Answer 41

taking those securities and trading back and forth

Question 42

Outside money

Answer 42

Money created by the government

Question 42

why is unemployment decreasing?

Answer 42

more people working and fewer people looking for jobs

Question 43

Inside money

Answer 43

Money created in the private sector