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Practice for Topic 6 Money, Banking & Financial Markets Flashcards | StudBud
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Practice for Topic 6 Money, Banking & Financial Markets
Practice for Topic 6 Money, Banking & Financial Markets
30 terms
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Stock, Bonds and Financial Markets
Flashcards
30 cards
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Practice quiz
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Questions
30
Answers
1
What conclusion can you draw about the role of the FED in response to the Great Recession? FED
allowed Congress to take the lead on fixing the economy.
supported an increase of foreign trade to help US businesses
promoted economic growth by lowering interest rates
prevented the government from passing new job legislation
2
If you wanted to purchase shares of a company, whom would you contact?
a day trader
the New York Stock Exchange
a commodities broker
a stockbroker or discount broker
3
Why choose a mutual fund rather than putting all your money in a single stock? You would be
more likely to lose money if all components perform well.
more likely to make money if short-term funds perform well.
more likely to make money if one component performs poorly.
less likely to lose money if one component performs poorly.
4
How does investment choice lead to economic growth? If you buy..
savings accounts, the banks reduce the number of loans
treasury bonds, the government limits your taxes
stocks, the company uses the $ to expand production
treasury bonds, the government limits your taxes
5
What is the message of this political cartoon? The Federal Reserve (FED) ...
does nothing to help the economy.
uses lower interest rates to solve many different problems
chair makes decisions without any input from others.
Board of Governors always meets.
6
Based on the graph, which role of the FED could it have done better during the 1980s and 1990s?
serving banks
regulating the banking system
regulating the money supply
serving government
7
Why might a financial planner encourage you to invest your money in mutual funds? Mutual funds
contribute a % of profits to the government to pay our debt
allow for diversification in your portfolio without high fee
provide the greatest possibility of return of any investment
distribute dividends at regular intervals through the year
8
Which of these mortgages would a homebuyer choose if want stability & a low monthly payment?
5/1 adjustable-rate mortgage
30-year fixed-rate mortgaged
1-year adjustable-rate mortgage
15-year fixed-rate mortgage
9
What is the main reason for the difference in interest rates for savings accounts vs. CDs?
Savings rates are higher as accounts require higher balances
CD rates are higher because you cannot remove money til end
CD rates are higher because CDs require higher balances
Savings rates are higher because you cannot write checks
10
Which of the following characteristics of a bond would you most attractive to you, an investor?
long term of maturity
low credit rating
low par value
high coupon rate
11
How does the principle of compound interest help encourage investment? Compound interest means
savers earn less on their investments.
borrowers pay less for their loans.
savers earn more on their investments.
borrowers pay more for their loans.
12
Beginning in 2008, why did the Federal Reserve choose to follow the policy shown by this graph?
to help banks make loans to new businesses
to help banks make loans to homebuyers
to reduce the impact of the financial crisis
to reduce the impact of high unemployment
13
What term describes a balanced group of investments, similar to the one shown here?
liquid
allocated
profit-centered
diversified
14
Which of the following statements is reflected in this graph?
The early 2000s were a period of economic stability.
Through most of 1900s, many believed stocks were too risky
A significant drop in the Dow in 1987 scared off investors
After the Great Depression, many people invested in stocks
15
Why is the object in this photo an example of commodity money? The coin is ...
valuable separate from its use as a method of exchange
representative of currency in a barter system.
commemoration of early contributions to the monetary system.
used to purchase goods from other countries.
16
What is the function of a municipal bond? To provide money for ...
local government to finance public projects
the federal government to pay its debts
individuals who are willing to take high risks
a firm to expand its business
17
What function does money serve to a person who is deciding where to buy a bike? Bicycle stores
accept a variety of payment options so you can buy on credit
mark the price in dollars so you can shop for best value
carry different inventories so you can buy best bike for you
have annual sales, so you can buy a bike cheaply
18
Based on this graph, which of the statements below is correct?
Between 2003 and 2007, percent of subprime mortgages tripled
Banks generally lent less money after 2003
Real estate prices dropped significantly after 2003
Fewer homes were sold after 2003
19
In this scenario, why did investor 2 not want to buy the bond at 5% interest? He could earn ...
better return if he bought new bond at higher interest rate
better return if she invested money in the stock market.
better return if he bought the bond at a lower interest rate
better return by buying another bond at a discount from par
20
What is the difference between Saving & Investing?
all of these
Investing involves higher risk
Saving involves low risk because may need money soon
Investing should be done over a long period of time
21
Which of the following is generally true about financial intermediaries?
Intermediaries provide information to savers and investors.
Intermediaries channel money from investors to savers.
Intermediaries increase the level of risk for investors.
Intermediaries are government agencies.
22
This quotation reflects what principle of investing?
Higher risk usually offers higher potential return.
Greater liquidity usually offers lower potential return.
Higher risk usually offers lower potential return.
Greater liquidity usually offers higher potential return.
23
How did abandonment of the gold standard help the economy during the Depression? It allowed...
the President to take over failed banks that held gold.
the Federal Reserve to base the value of the dollar on gold.
the Federal Reserve to increase the money supply.
the government to insure deposits.
24
According to the graphic, why would an investor buy a call option? To benefit from ...
a future rise in stock prices
a future drop in bond prices
drop in stock prices
a future rise in bond prices
25
This cartoon illustrates what aspect of investing in the stock market?
Investing in the stock market can have high risks.
Investing in the stock market is easy using technology.
Investing in the stock market can provide high returns.
Investing in the stock market requires a lot of education.
26
The table below shows the pros and cons of what type of loan?
mortgage
money market
auto loan
credit card
27
By how much did DOW Jones Industrial Average increase from 1990 to its highest point on graph?
It has doubled (2x)
It has quadrupled (4x)
It has tripled (3x)
It has quintupled (5x)
28
In which year on the graph would junk bonds have been most likely to attract investors?
2013
2001
2004
2008
29
The locations of the 12 Federal Reserve Districts are ...
reflective of geographic concentration of banking activity
disproportionate in size yet balanced in economic strength.
equally divided to ensure fair access to loan services.
representative of government’s plan to consolidate banking
30
As a house painter, what trouble could you have exchanging your services for a digital camera?
hard to complete the paint job in a timely manner
hard to explain why he is painting someone’s house for free
hard to find someone who wants painting & has camera u want
hard to provide painting services without getting any money
