U.S. and Global Economics: Unit 4 – Flashcards

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