Economics Unit 3 Macroeconomics Test – Flashcards
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Limited liability is one characteristic of the corporate form of business organization. True or False
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True
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Sole proprietorships must request a charter from the state in which they are organized. True or False
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False
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The traditional theory of wage determination states that wages are set according to the laws of supply and demand. True or False
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True
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A merger of corporations involved in different steps of manufacturing or marketing is known as a
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Vertical merger
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An advantage of a corporation is that
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owners have limited liability for debt.
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Workers who have the skills to operate machines and who require a minimum amount of training are
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semiskilled labor.
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Workers with knowledge-based education and managerial skills are
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professional labor.
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Limited Liability
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Investor's responsibility for the debts of a business which is limited by the size of his or her investment in the business.
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Interest
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Price paid for the use of another's money.
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Collective Bargaining
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Negotiation by a labor union with management over issues such as pay, working hours, and vacation.
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Bankruptcy
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Court-granted permission to an individual or business to cease or delay paying debts.
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Stock
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Ownership certificates in a firm.
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Corporation
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Form of business organization recognized by law as a separate legal entity having all the rights of an individual.
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Partnership
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Business that is jointly owned by two or more persons.
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Labor Union
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Organization of workers formed to represent its members' interests in various employment matters.
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Which is NOT a key economics role of the US Government?
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Education
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Which is NOT a regulatory agency that protects public safety?
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Internal Revenue Service
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Competition among borrowers:
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Raises Interest rates.
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Competition among lenders:
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Lowers interest rates.
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Competition among employers:
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Raises Wages
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Competition among employees:
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Lowers wages.
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Competition among buyers:
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Raises prices.
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Competition among sellers:
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Lowers prices.
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To be a successful medium of exchange money must exist in an unlimited supply. True or False
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False
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The Fed requires all members banks to deposit a percentage of every deposit either in their bank vaults or in the Fed to use as a reserve. True or False
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True
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A long-run effect of increasing the money supply can be inflation. True or False
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True
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Money loses its value when it
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becomes too plentiful.
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In order for money to have value, it must have all the following characteristics EXCEPT
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plentiful availability.
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A coin in circulations today lasts about 20 years, making modern money reasonably______.
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Durable
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When people do not have money but instead rely on trading goods and services, they live in a___________.
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Barter Economy
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Store of Value
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Function of money that allows people to save it for later use.
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Divisibility
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Characteristic of money that allow us to purchase things at any cost, no matter how small.
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Savings Account
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Money kept in a bank or savings and loan association for safekeeping; earns interest on all money kept here.
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Barter Economy
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Economy based on trade rather than money.
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Reserve Requirement
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Rule stating that a percentage of every deposit must be set aside as legal reserves.
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Medium of Exchange
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Something accepted as payment for goods and services.
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Certificate of Deposit (CD)
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Interest-bearing deposit that cannot be withdrawn without prior notice or penalty.
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Federal Reserve Note
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Paper currency issued by the Federal Reserve System.
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High returns on investments are usually associated with low risks. True or False
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False
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The three components of bands are the coupon, maturity, and the rating. True or False
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False
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Bond ratings can be used as a measure of the bond's risk. True or False
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True
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When people invest in mutual funds, they are making loans to banks and their investments are insured by the FDIC. True or False
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False
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Which one is the least risky investment?
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Mutual fund
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The Bond Market
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An organized way of buying and selling corporate and government debt.
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Certificate of Deposit
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An account at a bank that earns interest but charges a penalty to the customer if withdrawn early.
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Mutual Fund
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A large collection of stocks and bonds that were purchased using many individuals money.
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Why does the US Government need to protect competition?
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Free markets will eventually turn into monopolies without regulation
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GDP is:
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The dollar value of everything produced in a year
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The government collects taxes (to influence behavior, slow down the economy, pay for expenses) for all of the following reasons EXCEPT:
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to reduce unemployment
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When GDP is too high, the government should:
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raise taxes, lower spending
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When GDP is too low, the government should
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lower taxes, raise spending
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A monopoly is:
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A company that controls the entire industry
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A trust is:
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A group of companies that control the entire industry
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Municipal bonds, or munis,
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are usually a safe investment
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Where is the best place to save money?
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It depends on the person's savings objectives
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The risk-return relationship rule says:
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The more risk an investment has, the more return
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Which one is the riskiest investment?
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small company stock
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Which is a benefit of saving money?
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Banks have more to lend Saving allows for more economic activity, which creates jobs Businesses have more to invest in growth
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The Stock Market
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An organized way of buying and selling ownership in public corporations.
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Real estate
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Land or buildings.
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Life insurance
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A policy that is paid in advance and will benefit to the deceased family
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Checking account
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An account at a bank that earns interest that allows the customer to withdraw funds at any time
