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Questions and Answers
Questions and Answers
What is barter?
What is barter?
- A market system
- A type of currency
- Exchange goods or services for other goods or services without using money (correct)
- Exchange using currency
What is representative money?
What is representative money?
An item such as a token or piece of paper that has no intrinsic value, but can be exchanged on demand for a commodity that does have intrinsic value
What does FDIC stand for?
What does FDIC stand for?
Federal Deposit Insurance Corporation
Federalists believed a centralized bank was unnecessary.
Federalists believed a centralized bank was unnecessary.
What occurred during the Free Banking Era?
What occurred during the Free Banking Era?
What were greenbacks?
What were greenbacks?
What is a mortgage?
What is a mortgage?
What are liquid assets?
What are liquid assets?
What is a bank run?
What is a bank run?
What is fiat money?
What is fiat money?
What caused the Savings and Loan crisis?
What caused the Savings and Loan crisis?
What is near money?
What is near money?
Why is representative money more useful than commodity money?
Why is representative money more useful than commodity money?
What is the gold standard?
What is the gold standard?
What is fractional reserve banking?
What is fractional reserve banking?
What is principal in a loan?
What is principal in a loan?
What is interest?
What is interest?
What are financial intermediaries?
What are financial intermediaries?
What is the coupon rate of bonds?
What is the coupon rate of bonds?
How do savings bonds differ from other bonds?
How do savings bonds differ from other bonds?
What is a municipal bond?
What is a municipal bond?
Money market funds are insured by FDIC.
Money market funds are insured by FDIC.
What does equity refer to in economics?
What does equity refer to in economics?
What are mutual funds?
What are mutual funds?
Treasury bills pay state tax.
Treasury bills pay state tax.
Low risk bonds usually have high return rates.
Low risk bonds usually have high return rates.
High risk bonds guarantee high returns.
High risk bonds guarantee high returns.
What is an entrepreneur?
What is an entrepreneur?
What does liquidity mean?
What does liquidity mean?
What is an example of a coupon rate?
What is an example of a coupon rate?
What is currency?
What is currency?
What is commodity money?
What is commodity money?
What does default mean?
What does default mean?
What is the Federal Reserve System?
What is the Federal Reserve System?
What does interest refer to?
What does interest refer to?
What is principal in financial terms?
What is principal in financial terms?
What is representative money?
What is representative money?
What is a bear market?
What is a bear market?
What does equity indicate?
What does equity indicate?
What is an investment?
What is an investment?
What are financial assets?
What are financial assets?
What are pension funds?
What are pension funds?
What does diversification mean?
What does diversification mean?
What is a portfolio?
What is a portfolio?
What is a prospectus?
What is a prospectus?
What does return refer to?
What does return refer to?
What is a Certificate of Deposit (CD)?
What is a Certificate of Deposit (CD)?
What are bonds?
What are bonds?
What are the 3 components of bonds?
What are the 3 components of bonds?
What does yield refer to?
What does yield refer to?
What is a discount from par?
What is a discount from par?
Match the following bond ratings with their risk level:
Match the following bond ratings with their risk level:
What are the advantages of bonds?
What are the advantages of bonds?
What are the disadvantages of bonds?
What are the disadvantages of bonds?
What are savings bonds?
What are savings bonds?
What is a treasury bond?
What is a treasury bond?
What is a municipal bond?
What is a municipal bond?
What are corporate bonds?
What are corporate bonds?
What are junk bonds?
What are junk bonds?
What does SEC stand for?
What does SEC stand for?
What are capital markets?
What are capital markets?
What are money markets?
What are money markets?
What are primary markets?
What are primary markets?
What are secondary markets?
What are secondary markets?
Why should you put your money in the stock market?
Why should you put your money in the stock market?
What is M1 in the money supply?
What is M1 in the money supply?
What is M2 in the money supply?
What is M2 in the money supply?
Who usually charges the highest rates?
Who usually charges the highest rates?
What are characteristics of money?
What are characteristics of money?
A debit card is equal to what?
A debit card is equal to what?
What are reasons to establish a strong national bank?
What are reasons to establish a strong national bank?
What are reasons for distrust of early banks?
What are reasons for distrust of early banks?
What is meant by 'wildcat bank'?
What is meant by 'wildcat bank'?
Questions and Answers
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Flashcards
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Study Notes
Study Notes
Barter and Currency Concepts
- Barter: Direct exchange of goods or services without using money.
- Representative Money: Has no intrinsic value but can be exchanged for a commodity like gold or silver.
- Greenbacks: Paper currency issued during the American Civil War, notable for the green ink on the reverse.
- Fiat Money: Government-controlled money supply, not backed by a physical commodity.
Banking Systems and Regulations
- FDIC: Insures bank deposits in the U.S. to maintain public confidence in the financial system.
- Federal Reserve System: Central bank of the U.S., responsible for regulating the monetary system.
- Fractional Reserve Banking: Only a portion of bank deposits are backed by actual cash available for withdrawal.
Historical Banking Context
- Free Banking Era: Period with no federal bank where states and private institutions issued their own currencies, leading to bank failures and worthless bills.
- Savings and Loan Crisis: Resulted in the failure of over 1,000 savings and loan associations due to poor regulation between 1986-1995.
Investment and Bonds
- Bonds: A certificate indicating loaning money to a company, with three main components: coupon rate, maturity, and par value.
- Municipal Bonds: Debt securities from states or local governments, can be general obligation or revenue bonds.
- Junk Bonds: High-risk, high-yield bonds with returns up to 12%.
- Corporate Bonds: Investment-grade bonds issued by companies, part of a broader capital markets ecosystem.
- Treasury Bills: Short-term government bonds exempt from state tax.
Financial Instruments and Market Types
- Mutual Funds: Investment programs with diversified holdings, managed professionally.
- Money Market Funds: Provide liquidity but are not insured by the FDIC.
- Primary Markets: Securities can only be redeemed by their original holders.
- Secondary Markets: Securities can be resold multiple times.
Risk and Return in Investments
- Low-Risk Bonds: Typically provide stable returns with lower volatility.
- High-Risk Bonds: Offer potential for high returns but come with increased risk of loss.
- Yield: The annual rate of return on an investment, essential for evaluating bond performance.
Economic Principles and Concepts
- Liquidity: Refers to how easily assets can be converted to cash without loss in value.
- Equity: Fairness in economics, particularly concerning taxation; horizontal equity treats similar situations alike.
- Diversification: Spreading out investments to mitigate risk.
- Principal and Interest: Principal is the amount owed on a loan while interest is the cost paid to borrow that money.
Money Supply and Characteristics
- M1 and M2 Money Supply: M1 consists of currency, demand deposits, and checks while M2 includes M1 plus savings accounts and money market funds.
- Characteristics of Money: Durability, portability, divisibility, and stability are essential traits for effective currency.
Historical Trust Issues and Banking
- Wildcat Banking: Refers to risky banking practices during the Free Banking Era that led to significant distrust in banks.
- Early Bank Distrust: Resulted from issues like bank runs and unregulated state currencies.
Role of Financial Intermediaries
- Financial Intermediaries: Entities like banks and credit unions that facilitate lending and borrowing between parties.
General Financial Knowledge
- Advantages of Bonds: Fixed payment obligations without sharing profits.
- Disadvantages of Bonds: Continuous payment requirements even during financial losses.
- Pension Funds: Source of income received post-retirement, such as contributions to a 403B plan.
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