What gives fiat money its value as a medium of exchange?

A government declaration that it has value

What do companies gain by offering shares for sale in a stock market?

They increase their working capital without taking on debt

A futures contract does which of the following?

Sets the price / date for a commodity purchase in advance of that purchase

How did the invention of money as a medium of exchange affect the barter system?

Nonperishable items were included as a medium of exchange.

This is when a company decides to first offer to sell its stock

Why are junk bonds called "junk"?

They have a high risk of default

When people buy bonds, they are actually doing which of the following?

Loaning money to the bond issuer

How do traders make a profit in the currency exchange market?

They buy foreign currencies and sell them later for a higher price

What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?

To guarantee customers' bank deposits

What is one main reason why a company decides to go public?

To raise money without having to go into debt

The Federal Reserve Bank Does What?

Sets the required reserve ration and the discount rate

What is one of the drawbacks of pursuing equity financing?

Selling equity gives some control of the company to its investors

Which of the following explains what an exchange rate of 1:9 between the Euro and Pesos means?

It takes only one euro to buy nine pesos

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HST413 ECON - Unit 4 Test Review

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Questions 22

Answers

1
Where Would you Get a Business Loan From?
Private Bank
Wealthy Individual
Bond issue
Group of investors
2
What gives fiat money its value as a medium of exchange?
A government declaration that it has value
Its usefulness as a productive input
The value people give to precious metals
A price on the stock exchange
3
What do companies gain by offering shares for sale in a stock market?
They capture a greater percentage of market share
They face fewer restrictions from the government
They reduce their expenses without reducing revenues
They increase their working capital without taking on debt
4
A futures contract does which of the following?
Limits the future liability of one set of partners if a business fails
Temporarily increases the supply of a commodity in order to meet demand
Sets the price / date for a commodity purchase in advance of that purchase
Establishes a pegged exchange rate between two currencies
5
How did the invention of money as a medium of exchange affect the barter system?
The barter system was completely eliminated.
Nonperishable items were included as a medium of exchange.
The value of the goods used to barter was drastically reduced
The barter system remained major method of exchanging goods and services
6
What is an IPO?
This is when a company decides to first offer to sell its stock
This is when a company seeks venture debt
This is when a company begins selling bonds
This is when a company goes bankrupt
7
What is One Risk of Being a Shareholder?
You can lose your money
You can maximize your profit
All ofthe above
There are no major risks
8
Why are junk bonds called "junk"?
They have a low yield of return
They cannot be sold until their maturity date
They have a high risk of default
They are issued by governments that are heavily in debt
9
When people buy bonds, they are actually doing which of the following?
Acquiring partial ownership of a company
Loaning money to the bond issuer
Purchasing a foreign currency
Keeping the government out of debt
10
How do traders make a profit in the currency exchange market?
They buy foreign currencies and sell them later for a higher price
They exchange low-value currencies for higher-value commodities
They leverage small business loans to purchase low-rated foreign bonds
They redeem government bonds for foreign currencies with high values
11
How does raising the discount rate affect the money supply?
Decreases the money supply
Increases the money supply
Reduces unemployment
Levels off economic growth
12
Which of these would be available for sale on the commodity market?
Turkey sandwiches
Potato chips
Apples
Lunch boxes
13
What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?
To prevent banks from failing
To guarantee customers' bank deposits
To control the money supply
To regulate the loans banks make
14
Define: A Bull Market
Downward trend in stock prices
Upward trend stock prices
Major decrease in stock prices
Stock prices that are higher than their real value
15
What does a shareholder get when a dividend is paid?
A reduction in taxes
A share of a company's profits
A bond issued by the company
An increase in personal debt
16
What is one main reason why a company decides to go public?
To eliminate the pressure to make profit
To capture a larger share of the market
To get subsidies from the government
To raise money without having to go into debt
17
Which of the following is true of goods traded in the commodity market?
They're normal goods
They're raw and unprocessed
They have elastic demand
They're not fungible
18
The Federal Reserve Bank Does What?
All ofthe above
Sets the required reserve ration and the discount rate
Guarantees deposits against bank failure
Regulates and polices the stock market
19
Technical analysis of the stock of a particular company focuses not on the company itself but on which of the following?
The unemployment rate
The business cycle
Current trends in the market
Government planning
20
What is one of the drawbacks of pursuing equity financing?
Startup capital must be acquired before equity financing can be pursued
Selling equity gives some control of the company to its investors
Taking a loan to get equity reduces money that can be spent on production
Using equity financing reduces the market capitalization of the company
21
Which agency of the U.S. government is primarily responsible for enacting monetary policy to manage the U.S. economy?
The Small Business Association
The Securities and Exchange Commission
The Federal Deposit Insurance Corporation
The Federal Reserve Bank
22
Which of the following explains what an exchange rate of 1:9 between the Euro and Pesos means?
It takes only one euro to buy nine pesos
I"VE GOT THE MONEY!!!!
Goods and services are nine times as expensive in Europe
It takes only one peso to buy nine Euros

HST413 ECON - Unit 4 Test Review Flashcards | StudBud