Unit 4 Test Flashcards
Which describes the type of exchange that does not use money?
bartering
Which statement accurately describes the relationship between commodity money and fiat money?
Commodity money has value in itself while fiat money has value only because it is given value.
Which accurately describes the requirements banks must meet under a fractional reserve banking system?
Banks must keep a specific percentage of deposits on hand.
Which is the purpose of the Federal Reserve Bank?
manage the growth of the U.S. economy
Which can the Fed accomplish by raising or lowering the required reserve ratio?
increase or decrease the money supply
Which explains how Treasury bonds can have an effect on the size of the money supply?
The Federal Reserve Bank can buy and sell Treasury bonds to raise or lower bank deposits.
Which describes the most likely effect of the sale of a new batch of Treasury bonds?
decrease in the money supply
Which describes someone’s expected outcome from investing in the stock market?
making profit from savings
Which is a risk of being a stockholder?
may not get an increase in the amount of one’s investment
Which is traded in a currency exchange market?
foreign money
Which of the following accurately describes socially responsible investing?
Investors buy into companies with ethical practices they support.
On which does technical analysis of the stock market focus?
overall trends in the market
Which accurately explains the difference between the stock market and the bond market?
Equity is bought and sold in the stock market while debt is bought and sold in the bond market.
A company that wanted to increase its capital through debt financing could trade in which market?
bond market
In which would wheat be purchased?
commodity market
A commodity futures market exists within the broader commodities market for which reason?
Contracts setting the price and date for a commodity purchase are transferable.
Which best explains how bondholders and banks serve a similar function?
both are holders of someone else’s debt
Which is the act of buying and selling money using other types of money?
exchanging currency
Which accurately explains what an exchange rate of 1:9 between the European euro and Mexican pesos means?
It takes only one euro to buy nine pesos.
Which does buying on margin involve?
traders borrowing money from their brokers
Because banks are often unwilling to loan money to a business in its early stages of development, startup businesses have a difficult time doing which of the following?
getting debt financing
Which must businesses generally have to have to get loans from a private bank?
a history of profitable operation
Which best describes the meaning of “going public”?
when a company begins selling shares of its stock to the public
Which describes a condition that is LEAST favorable for conducting an IPO?
a recession
