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Econ Unit 4 Test

QuestionAnswer
What is commodity money? Money with intrinsic value
What is fiat money? Money without value outside of what the gov says
Characteristics of effective money Portability, durability, divisibility, limited supply
Too much money causes what? Decreased value
What are the three functions of money? Medium of exchange, measure of value, store of value
What is a demand deposit account? A deposit you can easily put in and get back
Name examples of an M1 account. Cash, savings, Traveler's checks, checkable deposits
What is an M2 account? An M1 account plus mutual funds
What is the purpose of the Federal Reserve? Bank oversight and deposit insurance
What is a bank run? When many depositors withdraw their money at the same time
What is the FDIC? Federal Deposit Insurance Corporation
What does the FDIC do? Insurances bank deposits (up to $250k)
Define liquidity How easily accessible/convertible an asset it
Define the Inconvertible Fiat Money Standard. Money isn't backed by gold or silver
When you get a paycheck, you can ________ or ________ it. Save, spend
Saving money allows a bank to Lend/borrow it
Name an example of a savings account. Savings account, certificate of deposit, gov bonds, corporate bonds
The financial system is a network of.... Savers, investors, and financial institutions
What is another word for financial middlemen? Financial intermediaries
Name an example of brick and mortar intermediaries Commercial banks, credit unions, savings banks, mutual savings banks
Name an example of nonbank financial intermediaries Mutual funds, pension funds, finance companies, life insurance companies
With ________ you pay monthly premiums so that money goes to your beneficiary when you pass away Life insurance
When you invest in something, you have to look at the _______ vs the _______ Risk/return, reward
What is the riskiest investment? Trading
______ are a long-term IOU. Bonds
What makes up a bond? Coupon, maturity, par-value
Other investments include ________ and _________ Savings bonds and gov bonds
When you retire, what are usually your 2 options? 401(k) and IRA
Which retirement plan gives the highest return and most money? 401(k)
True or false: You can have a 401(k) when you're self-employed False, only an employer can provide a 401(k)
_______ are another word for stocks and they show ownership in corporations Equities
What is the Efficient Market Hypothesis? Argues that stocks are usually priced about right and bargains are hard to come by
The easiest way to buy stocks today is through the ________ or by hiring a ________ Internet, stockbroker
What is it called when you invest in various types of stocks? Portfolio diversification
What are places where stocks are bought and sold? Stock exchanges
Name an example of stock exchanges AMEX, NYSE
_________ is a popular stock exchange where over the counter stocks are bought and sold NASDAQ
What is an over the counter market? A large system of stock markets connected by a computer system
The _______ measures the performance of ___ of the best stocks. DJIA, 30
What is a bull market? A strong upward moving stock market
What is a bear market? A strong downward moving stock market
An ______ contract is an agreement to buy/sell stock in the future Futures market
The _________ option is the right to buy stock in the future Call
The _________ option is the right to sell stock in the future Put
What is the best interest rate for any investment? 6%
Created by: aodow9981
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