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U.S. and Global Economics: Unit 4

Which of the following best explains how the invention of money affected the barter system?
supplemented the barter system by providing a nonperishable medium of exchange
Which of the following has no value except as a medium of exchange?
fiat money
Which of the following most accurately explains why fiat money has value?
Fiat money has value because the government declares that it has value.
Which is an asset?
jewelry someone owns
Which of the following most accurately describes what banks do with their excess reserves?
Banks use excess reserves to make loans to customers so that they can make profits on the interest.
Which of the following best describes the purpose of the Federal Reserve Bank?
manages the U.S. economy by controlling the money supply
Which of the following government agencies is responsible for managing the money supply in the United States?
Federal Reserve Bank
Which of the following best explains why raising the discount rate affects the money supply?
Banks keep more reserves on hand to avoid paying a lot to borrow from the Fed.
Which of the following best explains why Treasury bonds have an effect on the size of the money supply?
The Federal Reserve Bank can buy and sell these bonds to raise or lower bank deposits.
Which of the following actions is most likely to result in an increase in the money supply?
The Fed buys millions of dollars in Treasury bonds.
Which of the following best describes the purpose of making an investment?
use money to make more money
Which of the following best describes a dividend?
share of a company’s profit paid to each stockholder
Which of the following most accurately states one of the risks of being a stockholder?
Stockholders aren’t guaranteed a return on their investment.
Which of the following is not a disadvantage of offering the sale of shares in a company?
The company can increase its capital without going into debt.
Which of the following has the highest level of security?
ownership of preferred stock
Which describes a crash?
major decrease in stock prices
Which of the following most accurately describes an over-the-counter market?
does not take place in a centralized exchange place
Which of the following is not a goal that an investor could be pursuing when selecting stocks to buy?
increasing a company’s market capitalization
Which describes a bull market?
when there is a rise or expected rise in stock prices
Which kind of stock market analysis focuses on overall trends in the market?
technical analysis
Which describes the commodity market?
volatile market
Which would be sold in a currency exchange market?
Japanese yen
Which of the following is not a commodity?
automobile
Which of the following best explains what a futures contract does?
sets the price and date for a commodity purchase
Which of the following best explains what happens when a company or government issues bonds?
goes into debt to those who purchase the bonds
Which bond type has the highest risk of default?
junk bonds
Which of the following accurately describes the process of currency exchange?
Money from one country is bought using money from another country.
If the exchange rate between British pounds and U.S. dollars is 1 to 1.5, which of the following is true?
It takes $1.50 to buy one British pound.
Which of the following best explains what happens to the exchange rate of a floating currency?
The exchange rate for that currency changes depending on the operations of the free market.
Currency traders can use leverage to do which of the following?
buy large amounts of a currency with little money up front
Which of the following best states the difference between seed capital and startup capital?
Seed capital is for research and planning while startup capital is for operating expenses.
Which is an example of equity financing?
selling ownership in the company
Which of the following best states one of the disadvantages of equity financing?
Selling stock gives the shareholders some control over the company.
Which of the following best describes the purpose of angel capital?
fund companies at the startup stage of development
Which of the following enterprises would be most likely to secure a large business loan?
a well-established real-estate developer
Which of the following accurately describes an initial public offering (IPO)?
first sale of stock to the public
Which of the following is one advantage for a company that goes public?
Money is raised without going into debt.
Which does a company do during the post-IPO stage?
uses proceeds to expand
Which of the following factors would be most likely to lead to an unsuccessful IPO?
bearish market conditions
Which of the following does not help explain why the Google IPO was successful?
Google’s history of borrowing large sums of money.

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