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Econ Unit 4 Set 2
Test Description: Prepare for the Unit 4 Test
Instructions: Answer all questions to get your test result.
1) Which of the following statements is true?
A
All of these.
B
Money serves as a store of value.
C
Money is a unit of account.
D
Money is a medium of exchange.
2) Savers and borrowers are linked through financial institutions when
A
the financial institutions offer the same rate of exchange to each.
B
borrowers take money from financial institutions to invest with savers.
C
savers deposit money that is used to loan money to borrowers.
D
both savers and borrowers invest in the same markets.
3) Money market mutual funds are riskier than savings accounts. Why?
A
They are not insured by the federal government.
B
They are invested in bonds with high failure rates.
C
They cannot be cashed in for six months.
D
They give lower returns.
4) Which of these is not a type of investment bond? (hint: there are more than just these!)
A
savings bond
B
James Bond.
C
municipal bond
D
corporate bond
5) The relationship between liquidity, risk and return is:
A
high risk = high return, high liquidity = low return
B
high risk = low return, high liquidity = low return
C
high risk = high return, high liquidity = high return
D
high risk = low return, high liquidity = high return
6) What is diversification?
A
Having a different color outfit for every day of the week.
B
Hiring employees of many racial, ethnic, and religious backgrounds to ensure being able to serve all customers.
C
Investing in many different types of assets to protect against loss in any one of them.
D
Studying the Bible closely so you can cite at least two verses to back up any claim you make.
7) Why is M2 greater than M1?
A
However large M1 gets, M2 will be larger because it includes M1.
B
M1 is all things that either are currency or can be made currency quickly. This amount is miniscule in comparison.
C
More money is invested in stocks and bonds than in savings accounts.
D
It isn't.
8) Why is representative money more useful than commodity money?
A
Representative money can be used for things besides currency-gems can be made into jewelry, cotton can be made into cloth...
B
Representative money has value because the government says it does. Commodity money has value only to those who believe it.
C
Representative money exists in unlimited supply, allowing many more people to make use of it.
D
Representative money is portable, durable, divisible, and acceptable and can be changed for something of value.
9) Erin borrowed $18,000 to buy a car. Her loan will be paid off in 5 years. By the time that she pays off the loan, she will have made $20,327 in payments. Why did she have to pay $2,327 more than the price of the car?
A
She had to pay principal of $2,327 for the privilege of borrowing the mortgage of $18,000.
B
She had to pay a default of $2,327 for the privilege of borrowing the principal of $18,000.
C
She had to pay interest of $2,327 for the privilege of borrowing the creditor of $18,000.
D
She had to pay interest of $2,327 for the privilege of borrowing the principal of $18,000.
10) Antifederalists opposed the national bank because
A
they wanted to be able to secure loans with foreign countries.
B
they thought national government would do a better job of regulating banks.
C
they feared the wealthy would use it to increase their power.
D
they wanted a uniform money supply throughout the country.
11) Alexander Hamilton was the first Secretary of the Treasury. Which of the following best describes Alexander Hamilton's opinion about banking?
A
He believed that the banking system already in existence was sufficient.
B
He believed that an international banking system was best for the country.
C
He believed that a strong, centralized banking system was necessary.
D
He believed that the nation's banks should be owned and run by state governments.
*select an answer for all questions
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