U.S. and Global Economics: Unit 4 – Flashcards
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Which of the following best explains how the invention of money affected the barter system?
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supplemented the barter system by providing a nonperishable medium of exchange
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Which of the following has no value except as a medium of exchange?
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fiat money
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Which of the following most accurately explains why fiat money has value?
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Fiat money has value because the government declares that it has value.
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Which is an asset?
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jewelry someone owns
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Which of the following most accurately describes what banks do with their excess reserves?
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Banks use excess reserves to make loans to customers so that they can make profits on the interest.
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Which of the following best describes the purpose of the Federal Reserve Bank?
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manages the U.S. economy by controlling the money supply
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Which of the following government agencies is responsible for managing the money supply in the United States?
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Federal Reserve Bank
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Which of the following best explains why raising the discount rate affects the money supply?
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Banks keep more reserves on hand to avoid paying a lot to borrow from the Fed.
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Which of the following best explains why Treasury bonds have an effect on the size of the money supply?
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The Federal Reserve Bank can buy and sell these bonds to raise or lower bank deposits.
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Which of the following actions is most likely to result in an increase in the money supply?
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The Fed buys millions of dollars in Treasury bonds.
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Which of the following best describes the purpose of making an investment?
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use money to make more money
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Which of the following best describes a dividend?
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share of a company's profit paid to each stockholder
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Which of the following most accurately states one of the risks of being a stockholder?
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Stockholders aren't guaranteed a return on their investment.
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Which of the following is not a disadvantage of offering the sale of shares in a company?
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The company can increase its capital without going into debt.
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Which of the following has the highest level of security?
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ownership of preferred stock
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Which describes a crash?
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major decrease in stock prices
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Which of the following most accurately describes an over-the-counter market?
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does not take place in a centralized exchange place
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Which of the following is not a goal that an investor could be pursuing when selecting stocks to buy?
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increasing a company's market capitalization
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Which describes a bull market?
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when there is a rise or expected rise in stock prices
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Which kind of stock market analysis focuses on overall trends in the market?
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technical analysis
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Which describes the commodity market?
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volatile market
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Which would be sold in a currency exchange market?
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Japanese yen
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Which of the following is not a commodity?
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automobile
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Which of the following best explains what a futures contract does?
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sets the price and date for a commodity purchase
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Which of the following best explains what happens when a company or government issues bonds?
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goes into debt to those who purchase the bonds
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Which bond type has the highest risk of default?
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junk bonds
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Which of the following accurately describes the process of currency exchange?
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Money from one country is bought using money from another country.
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If the exchange rate between British pounds and U.S. dollars is 1 to 1.5, which of the following is true?
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It takes $1.50 to buy one British pound.
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Which of the following best explains what happens to the exchange rate of a floating currency?
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The exchange rate for that currency changes depending on the operations of the free market.
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Currency traders can use leverage to do which of the following?
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buy large amounts of a currency with little money up front
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Which of the following best states the difference between seed capital and startup capital?
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Seed capital is for research and planning while startup capital is for operating expenses.
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Which is an example of equity financing?
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selling ownership in the company
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Which of the following best states one of the disadvantages of equity financing?
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Selling stock gives the shareholders some control over the company.
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Which of the following best describes the purpose of angel capital?
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fund companies at the startup stage of development
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Which of the following enterprises would be most likely to secure a large business loan?
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a well-established real-estate developer
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Which of the following accurately describes an initial public offering (IPO)?
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first sale of stock to the public
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Which of the following is one advantage for a company that goes public?
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Money is raised without going into debt.
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Which does a company do during the post-IPO stage?
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uses proceeds to expand
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Which of the following factors would be most likely to lead to an unsuccessful IPO?
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bearish market conditions
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Which of the following does not help explain why the Google IPO was successful?
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Google's history of borrowing large sums of money.
