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Economics > Test 4 > Flashcards

Test 4 Flashcards

1
Q

What are payments for insurance called?

A

Premiums

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2
Q

What is any form of money that has been declared a valid means of payment called?

A

Legal Tender

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3
Q

What are the resources corporations gather by selling ownership in their businesses?

A

Stocks

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4
Q

What are bars of gold, silver, or platinum?

A

Bullion

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5
Q

What is coined, metallic money called?

A

Specie

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6
Q

What type of investment is a share of a corporation’s profit?

A

dividends

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7
Q

What type of investment guarantees the amount of original investment plus a specified rate of interest by a certain date?

A

bonds

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8
Q

What are assets that flow easily since they can be converted into other investments?

A

liquid investments

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9
Q

What is an arrangement for the intent of providing for retirement from work?

A

Pension Plan

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10
Q

What allows for the investment of money in a wide variety of areas?

A

mutual funds

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11
Q

What legal entity is distinct from the people who own it?

A

corporation

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12
Q

What protects stockholders from paying the firm’s creditors in the event of failure or bankruptcy?

A

limited liability

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13
Q

What is a contract between two parties of protection against certain types of loss in exchange for payment?

A

Insurance

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14
Q

What is the exchange of one good for another good without a standard of money passing from hand to hand?

A

barter

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15
Q

What do governments do to their money when they add lead, copper, and iron to gold and silver coins?

A

Debase

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16
Q

When too much money is circulated, what is the result?

A

inflation

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17
Q

Who manages the US money supply?

A

Federal Reserve

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18
Q

What are the three main components of the Federal Reserve System?

A

Federal Open Market Committee
Federal Reserve banks
Board of Governors

19
Q

Where do most of the savings needed to fund R&D in market economies come from?

A

the private sector

20
Q

What insect does Proverbs instruct people to work like?

A

Ant

21
Q

What is the theory that the variation in the money supply is the main source of economic fluctuations?

A

Monetarism

22
Q

What are the three principal purposes or functions of money?

A

medium of exchange
measure of value
store of value

23
Q

What are the three key elements that determine how much investments will grow?

A

Time
Rate of Return
Amount Invested

24
Q

What United States Department is responsible for coining and printing American money?

A

Treasury Department

25
Q

What corporation created by Congress insures the money in each type of bank account?

A

Federal Deposit Insurance Corporation (FDIC)

26
Q

What term refers to one who lends money or capital?

A

creditor

27
Q

What term refers to one who borrows money?

A

debtor

28
Q

What is the commitment of resources to a project or purpose that is expected to bring future profit to the investor?

A

investment

29
Q

What did the apostle Paul say was the root of all evil?

A

the LOVE of money

30
Q

What principle refers to people hoarding stable forms of money while spending less stable forms?

A

Gresham’s Law

31
Q

What is legal tender that is backed by only a government’s promise?

A

fiat money

32
Q

What does CD stand for?

A

Certificate of Deposit

33
Q

What type of money consists only of transaction accounts, traveler’s checks, and all coins and paper money held only outside banks? (M1, M2, M3, or near-monies)

A

M1

34
Q

What is the value asserted to the worth of a coin or bill?

A

face value

35
Q

What type of investment allows an individual to receive a fixed amount of dividends before other investors?

A

Preferred stock

36
Q

What type of investment allows an individual to vote at company meetings?

A

Common Stock

37
Q

What is a written order that authorizes a bank to remove funds from an account?

A

check

38
Q

What quality should money possess that shows its availability in small or large units?

A

divisibility

39
Q

What quality should money possess that shows its stability in value?

A

constancy

40
Q

What type of account allows limited transactions and pays an interest rate that changes with the demand of loans?

A

money market

41
Q

What type of account guarantees a certain interest rate and has a specified maturity date?

A

CD

42
Q

ESSAY:

Why is the federal Social Security system a bad investment?

A
  • Instead of being placed in a potentially profitable investment, the money is placed into Social Security is spent by the government.
  • The program is built on an unstable “pay-as-you-go” foundation.
  • The system could ultimately collapse.
  • Much or all of the money that people have paid into the program over the years could be lost.
  • People could place the money they currently pay for Social Security into investments that would yield much higher returns.
    It is not the government’s responsibility to provide financially for its citizens.
43
Q

ESSAY:

Explain how the fractional reserve system of banking allows banks to hold less than 100 percent of deposits in reserve.

A
  • Banks have found that they need to keep only a small fraction of total deposits on hand for day-to-day operations.
  • It is unlikely that all their depositors will demand all of their money at once.
  • By lending out portions of their deposited money, banks are creating money that is not backed by bank assets.

Economics (13 decks)

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