Chapter 8-9 and test 4

Question 1

The commitment of resources to a project or purpose that is expected to bring future profit to the investor

Answer 1

Investment

Question 2

One who borrows money or capital

Answer 2

Debtor

Question 3

One who lends money or capital

Answer 3

Creditor

Question 4

The most common type of account

Answer 4

Checking account

Question 5

An account that allows checks to be written up to the dollar amount that the account holder has deposited.

Answer 5

Transaction account

Question 6

An account holder’s written order that authorizes his bank to withdraw funds from his account

Answer 6

Check

Question 7

A bank account that allows the account holder to earn interest on his deposits

Answer 7

Savings account

Question 8

An account that guarantees a certain interest rate and has a specified maturity date

Answer 8

CD, Certificate of Deposit

Question 9

An account that allows limited transactions and pays an interest rate that changes with the demand for loans

Answer 9

Money market account

Question 10

Governmental agency that insures private banks and accounts up to $100,000

Answer 10

Federal Deposit Insurance Corporation (FDIC)

Question 11

A contract between two parties in which one party protects the other against certain types of loss in exchange for payments called Premiums

Answer 11

Insurance

Question 12

An arrangement provided by an individual’s employer for the intent of providing for the employee’s retirement from work

Answer 12

Pension plan

Question 13

Plan in which an employer promises to pay an employee a certain amount per month after retirement based upon the employee’s salary and length of service

Answer 13

Defined benefit plan

Question 14

Plan in which an employer does not promise an employee any certain amount upon retirement and the employee, the employer, or both are required to contribute regularly to a special tax-sheltered retirement account set up for the employee

Answer 14

Defined contribution plan

Question 15

The resources corporations gather by selling ownership in their businesses

Answer 15

Stocks

Question 16

A legal entity which is distinct from the people who own it

Answer 16

Corporation

Question 17

Equal portions of a corporation’s stock

Answer 17

Shares

Question 18

Owns the hole business

Answer 18

Stockholder

Question 19

If a corporation fails or declares bankruptcy, the individual stockholders do not personally have to pay the firm’s creditors

Answer 19

Limited liability

Question 20

Shares of a corporation’s profit

Answer 20

Dividends

Question 21

A document that guarantees the bond holder the amount of his original investment plus a specified rate of interest by a certain date

Answer 21

Bond

Question 22

Investment companies that combine the resources of all their shareholders and invest the money in a wide variety of areas

Answer 22

Mutual funds

Question 23

Assets that flow easily since they can be converted into other investments or cash without much time or difficulty

Answer 23

Liquid investments

Question 24

Three elements to determine how much your investment would grow

Answer 24

Time, rate of return, and amount invested

Question 25

American form of social insurance was enacted in 1935

Answer 25

Social Security Act

Answer 26

Social Security Administration

Question 27

Anything that is generally accepted as a means of payments

Answer 27

Money

Question 28

The three purposes of money

Answer 28

1. Be a medium of exchange 2. Provide a measure of value 3. Provide a store of value

Question 29

The direct exchange of one good for another good without a standard form of money passing from hand to hand

Answer 29

Barter

Question 30

The six characteristics of money

Answer 30

Portability Durability Homogeneity Divisibility Constancy Intrinsic valuableness

Question 31

Coined, metallic money

Answer 31

Specie

Question 32

To lower the quality or value of something as in debasement of money

Answer 32

Debase

Question 33

The asserted value

Answer 33

Face value

Question 33

The idea that people will save forms of money that seem more stable and valuable and spend forms of money that seems less valuable; named after Sir Thomas Greshman's observation that **"bad money drives out good"**

Answer 33

Gresham's Law

Question 34

When the level of prices in the market rises because too much money is in circulation

Answer 34

Inflation

Question 35

If prices decrease because money seems more valuable and stable

Answer 35

Deflation

Question 36

Any form of money that has been declared a valid means of payment

Answer 36

Legal tender

Question 37

Gold, silver or platinum, usually found in the form of bars, ingots, or plates

Answer 37

Bullion

Question 38

A system which allows banks to hold less than 100 percent of deposits in reserve

Answer 38

Fractional reserve banking

Question 39

Legal tender that is backed by nothing but a government's promise

Answer 39

Fiat money

Question 40

**Most narrowly defined** part of the money supply consisting of the money in transaction accounts, traveler's checks, and all coins and currency held outside banks

Answer 40

M1

Question 41

Assets that can be easily converted into M1 because they are highly liquid

Answer 41

Near-monies

Question 42

That part of the money supply consisting of M1 plus noncheckable savings deposits, money market mutual funds and similar deposits, and time deposits worth less that $100,00

Answer 42

M2

Question 43

That part of the money supply consisting of M2 and time deposits worth over $100,000

Answer 43

M3

Question 44

Agency that prints money

Answer 44

United States Department of the Treasury

Question 45

The central banking network of the United States ultimately responsible for forming American monetary policy and for controlling the national money supply

Answer 45

Federal Reserve System

Question 46

Group of appointed officials who direct and supervise the Federal Reserve System

Answer 46

Board of Governors

Question 47

The Federal Reserve Committee that makes decisions regarding the buying and selling of government securities

Answer 47

Federal Open Market Committee

Question 48

Twelve central locations, one in each of the Federal Reserve districts, that implements the policies adopted by the Board of Governors

Answer 48

Federal Reserve Banks

Question 49

Three main tools of the Federal Reserve to increase or decrease the amount of money circulation

Answer 49

Open market operations Reserve ratios Discount rates

Question 50

A period, usually six months or longer, during which the economy recedes, or declines

Answer 50

Recession

Question 51

The theory that the variation in the money supply is the main source of economic fluctuations

Answer 51

Monetarism

Question 52

"Chicago school of ecomonics", Monetarism

Answer 52

Milton Friedman

Question 53

The three main components that make up the core of the Federal Reserve System

Answer 53

Board of Governors Federal Open Market Committee Federal Reserve Bank

Question 54

What does RND stands for?

Answer 54

Research and development

Question 55

Where does the capital for RND comes from?

Answer 55

Private sector

Question 56

What industry provides a lot of capital for research and developmen?

Answer 56

Insurance companies

Question 57

Knowing that the CD is less risky ,the rate of return would be higher or lower?

Answer 57

It would not be high

Question 58

Each owner of a corporation holds?

Answer 58

Shares

Question 59

This stock holder usually does not have a vote

Answer 59

Preferred stock

Question 60

The dividend is fixed does not change

Answer 60

Preferred stock

Question 61

Gets paid first before the other stockholders

Answer 61

Preferred

Question 62

Which stockholder is riskier? Common or preferred?

Answer 62

Common

Question 63

Would the interest in the common stock is riskier, the interest would be lower or higher?

Answer 63

Higher

Question 64

Safest form of investment

Answer 64

Bond

Question 65

Of the three elements to determine how much your investment would grow, which one is the most importan?

Answer 65

Time

Question 66

Why the social security savings is not a saving?

Answer 66

Because they spend the money

Answer 67

Collateral

Answer 68

Foreclosure

Answer 69

Premium

Answer 70

Cowpay

Question 71

ROA

Answer 72

IPO

Question 73

Differences between debit and credit card