econ 11-13

question

what is a barter economy
answer

money-less economy that relies on trade
question

what are the three functions of money?
answer

medium of exchange common denominator stone of value
question

what is commodity money?
answer

alternative use as an economic good
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what is fiat money?
answer

money by government decree
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what was used to \”back\” paper currency?
answer

gold and silver deposits in banks
question

why was specie considered the most desirable form of money?
answer

miner content and because it was in short supply
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what is a monetary unit?
answer

standard unit of currency
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what characteristics must money have in order to have value?
answer

portability durability divisibility limited availability
question

what led to americans’ distrust of paper currency?
answer

continental currency was worthless
question

what three problems arose from having different sources of paper currency?
answer

– hundreds of different kinds of circulation -surplus of notes through can be redeemed -easily counterfeited
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why did congress finally decide to print paper currency?
answer

raise money for Civil War
question

How did the government combine financing the financing the war with currency reform?
answer

purchase government bonds, part of requirements to get national charter
question

What are the two advantages of a gold standard?
answer

feel more secure with their money if they can be converted into gold
question

what effect would the changing price of gold in the world have on a government’s fixed price?
answer

pressure to change
question

what happens when a country has a managed money supply?
answer

controls quantity, composition, and quality of money supply
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how did the money supply affect prices in the 1990s
answer

contributed price stability
question

Federal Reserve System
answer

central bank that can lend to other banks in time of need
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run on the bank
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a rush by depositors to withdraw their funds before the bank failed
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FDIC
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insures customer deposits in the even of a bank failure
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fiat money
answer

currency by government decree
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medium of exchange
answer

something accepted as payment for goods and services
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greenback
answer

money named for the color of ink used to print it
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bank holiday
answer

brief period during which every united states bank had to close
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commercial bank
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bank that caters to business
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wam pum
answer

a form of native american currency made of shells
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wild cat bank
answer

bank that overprints currency
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legal tender
answer

government money that must be accepted in payment for debts
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gold certificate
answer

paper currency backed by gold on deposit with United States Treasury
question

national currency
answer

bank notes backed by United States bonds
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bullion
answer

ingot or bars of precious metals
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central bank
answer

bank that can lend money to other banks in time of need
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monetary unit
answer

standard unit of currency in a country’s money system
question

what are savings
answer

dollars that become available in the absence of consumption
question

what positive effects can savings have on businesses?
answer

positive funds available to borrowers who use them to produce new good
question

what is a financial system
answer

network of savers, investors, and financial institution
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what is a financial intermediary
answer

financial institution that brings together the funds carer provide
question

what is the circular flow of funds
answer

savers provide their funds directly or indirectly to the borrowers
question

which segments of the country are the largest borrowers
answer

government and businesses
question

examples of nonbank institution that can act as financial intermediaries
answer

– company make loans directly to consumers – life insurance company provide financial protection and make loans – mutual funds invest money for investors – pension funds collect income and disburse payments – real estate investments trusts make loans to construction
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what is risk
answer

situation which the outcome is uncertain
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when is an investor more likely to want assets that appreciate rather than generate current income
answer

saving from longterm retirement
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why do analysts advise people to invest in what they know
answer

investing in what you know can help you make sounder investment choices
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what do most investment advisers tell people?
answer

save something each month
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how do peple contribute to a 401(k) plan
answer

payroll deduction are invested in mutual funds
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what are bonds
answer

long term obligation that pay an interest rate
question

what are the three components of a bond
answer

coupon, maturity, the par value
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what two factors do investors consider before they decide what to offer for a bond
answer

changes in future interest rates and the risk that company will default
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what is a bond’s current yield
answer

annual interest divides by the purchase price
question

what is the capital market
answer

money is lent for more than one year
question

what is money market
answer

money lent for periods less than one year
question

what is a primary market
answer

original issues can repurchase
question

what is the major significance of the secondary market
answer

liquidity provides investors
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equities
answer

stocks that represent ownership shares in corporations
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financial system
answer

a network of savers, investors, and financial institutions that work together to transfer savings to investors
question

tax exempt
answer

feature where the federal government does not tax interest paid to investors
question

municipal bond
answer

issued by state or local government to raise funds
question

financial asset
answer

claims on the property and borrower’s income
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mutual fund
answer

company that sells stock in itself and then invests the money in stocks or bonds issued by other corporations
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bear market
answer

when prices of equities move sharply down
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premium
answer

price paid by the insured for a policy
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current yield
answer

the annual interest of a bond divided by its purchase
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bull market
answer

when prices of equities move up
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futures market
answer

market places in which futures are bought and sold
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portfolio diversification
answer

the practice of holding a large number of stocks so that increases in some can offset declines
question

stockbroker
answer

a person whose profession is to buy and sell equities for others
question

equities
answer

another name for stocks that represent ownership shares in a corporation
question

options
answer

contracts that provide the right to purchase to sell commodities and assets in the future at prices agreed on today
question

what things may be excluded from gdp
answer

intermediate products secondhand sales nonmarket transactions transaction
question

five measures of national income
answer

gross national product net national product national income personal income disposable personal income
question

four sectors of the economy
answer

consumer sector: household investment sector: proprietorship, partnerships, and corps. government sector: local, state, and federal level of government foreign sector: all consumers and producers outside the U.S.
question

what is the output-expenditure model
answer

macroeconomic model used to draw aggregate demand by consumers, investments, the government, and foreign sectors
question

to remove the distortions of inflation
answer

price index
question

why does the government periodically take a census?
answer

required by the constitution

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