Checkup 3

Question 1

forgoing present consumption to enable future consumption

Answer 1

saving

Question 2

business whose primary activities are buying, selling, and holding financial assets

Answer 2

financial institutions

Question 3

any financial asset that serves the function of money

Answer 3

money

Question 4

insurer of bank deposits

Answer 4

FDIC

Question 5

bond that involves a high risk

Answer 5

junk bond

Question 6

market of declining prices

Answer 6

bear market

Question 7

market of rising prices

Answer 7

bull market

Question 8

periodic payment made to stockholders

Answer 8

dividend

Question 9

increase in the value of stock

Answer 9

capital gain

Question 10

short-term promissory note issued by a large corporation

Answer 10

commercial paper

Question 11

government IOU with a maturity of less than one year

Answer 11

U.S Treasury bill

Question 12

less expensive, more risky stock

Answer 12

common stock

Question 13

stock that pays a fixed dividend rate

Answer 13

preferred stock

Question 14

root of all evil

Answer 14

love of money

Question 15

Money is a highly ________________ financial ___________________ that makes the economy function smoothly.

Answer 15

liquid; asset

Question 16

List the three functions that money serves.

Answer 16

a store of wealth, a medium of exchange, a measure of value

Question 17

For money to function in a modern economy, it is necessary that …

Answer 17

all people believe that all other people will accept it in exchange for their goods

Question 18

To prevent fluctuations in the money supply, the money _____________ must control the supply.

Answer 18

issuer

Question 19

The __________________________ issues money in the United States.

Answer 19

Federal Reserve Bank

Question 20

Any measurement of money is meaningful because it conveys a ____________ price.

Answer 20

relative

Question 21

Of the economists’ definitions of money, _ is the broadest definition and includes all short-term financial assets.

Answer 21

L

Question 22

What is the narrowest definition of money and includes only travelers’ checks, cash, and checking account balances?

Answer 22

M1

Question 23

A credit card is a/an __________ to the bank that issues it, but is a/an __________ to its holder.

Answer 23

asset; liability

Question 24

_________________________________ hold checking and savings account deposits and include banks, credit unions, and S&Ls.

Answer 24

Depository institutions

Question 25

Insurance companies and pension funds are ____________________________________.

Answer 25

contractual intermediaries

Question 26

Banks ___________________ money by using deposited funds as the basis for additional deposits in the form of loans.

Answer 26

create

Question 27

If a bank has $3,000,000 in deposits and a reserve requirement of 10 percent, it must hold __________________________ as a reserve and can create ___________________________.

Answer 27

$300,000; $30,000,000

Question 28

The economic problems that may result from the creation of money by banks include ___________________________________________________________, ______________________________________________________, _________________________________.

Answer 28

an increase in prices and a decrease in the value of money; a financial panic when depositors all demand their money at once; bank failures

Question 29

Included as (a) disadvantage(s) to government insurance of deposits is/are the fact(s) that it _________________ and ___________________________________________________.

Answer 29

is very expensive; removes an effective restraint on bank lending policies

Question 30

Stocks have no _______________________________ and __________________________.

Answer 30

guaranteed value; maturity date

Question 31

Fannie Mae and Ginnie Mae are government-organized companies that sell bonds and purchase _____________ from banks.

Answer 31

mortgage

Question 32

The Bible teaches that we are to lay up treasures in ________________ rather than accumulate _____________ wealth.

Answer 32

Heaven; earthly

Question 33

What does Fannie Mae mean?

Answer 33

Federal National Mortgage Association

Question 34

What does Ginnie Mae mean?

Answer 34

Government National Mortgage Association