Econ Unit 4 Set 2 Question Preview (ID: 33177)


Prepare For The Unit 4 Test. TEACHERS: click here for quick copy question ID numbers.

Which of the following statements is true?
a) Money is a unit of account.
b) Money is a medium of exchange.
c) Money serves as a store of value.
d) All of these.

Savers and borrowers are linked through financial institutions when
a) savers deposit money that is used to loan money to borrowers.
b) borrowers take money from financial institutions to invest with savers.
c) both savers and borrowers invest in the same markets.
d) the financial institutions offer the same rate of exchange to each.

Money market mutual funds are riskier than savings accounts. Why?
a) They cannot be cashed in for six months.
b) They are not insured by the federal government.
c) They give lower returns.
d) They are invested in bonds with high failure rates.

Which of these is not a type of investment bond? (hint: there are more than just these!)
a) municipal bond
b) savings bond
c) corporate bond
d) James Bond.

The relationship between liquidity, risk and return is:
a) high risk = high return, high liquidity = low return
b) high risk = high return, high liquidity = high return
c) high risk = low return, high liquidity = high return
d) high risk = low return, high liquidity = low return

What is diversification?
a) Hiring employees of many racial, ethnic, and religious backgrounds to ensure being able to serve all customers.
b) Having a different color outfit for every day of the week.
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.

Why is M2 greater than M1?
a) More money is invested in stocks and bonds than in savings accounts.
b) M1 is all things that either are currency or can be made currency quickly. This amount is miniscule in comparison.
c) However large M1 gets, M2 will be larger because it includes M1.
d) It isn't.

Why is representative money more useful than commodity money?
a) Representative money has value because the government says it does. Commodity money has value only to those who believe it.
b) Representative money is portable, durable, divisible, and acceptable and can be changed for something of value.
c) Representative money exists in unlimited supply, allowing many more people to make use of it.
d) Representative money can be used for things besides currency-gems can be made into jewelry, cotton can be made into cloth...

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.

Antifederalists opposed the national bank because
a) they thought national government would do a better job of regulating banks.
b) they wanted a uniform money supply throughout the country.
c) they feared the wealthy would use it to increase their power.
d) they wanted to be able to secure loans with foreign countries.

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 nation's banks should be owned and run by state governments.
b) He believed that a strong, centralized banking system was necessary.
c) He believed that the banking system already in existence was sufficient.
d) He believed that an international banking system was best for the country.

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