When inflation is very high, money is no longer a __________________ means of exchange.
difficult to counterfeit
Which was not a problem during the most recent financial crisis?
Excessively risky securities
Dramatic declines in bank assets
Declining home values and foreclosures
→ Total confidence in the long-term health of U.S. financial markets
If a person invests in the stock market through a vehicle that pools funds from a large number of people and buys and professionally manages stock from a number of diversified companies, that person is investing in a(n)
* mutual fund.
certificate of deposit.
individual retirement account.
When the Federal Reserve sells investments, it
clears all checks in the system immediately.
→ decreases the money supply.
increases the amount of insurance for accounts.
keeps the money supply the same.
increases the money supply.
Which of the following actions did the Federal Reserve not take during the most recent financial crisis to stave off economic collapse?
Lowered key interest rates
→ Allowed most troubled banks to fail
Lent money at discount rates to nonbanking institutions
Paid interest in reserve banks kept by the Fed
Purchased troubled assets from banks
If consumers do not pay off their entire credit card balance, they will
get a rebate from the card issuer.
* have to pay interest on the unpaid amount.
have to pay interest on the total paid and unpaid amount.
receive interest on the paid amount.
have the purchased goods repossessed.
Most brokerage firms also provide other services such as investment banking or selling securities.
When used to accumulate wealth, money functions as a
yardstick of value.
medium of exchange.
→ store of value.
measure of value.
When discussing financial institutions, what is a shrinking capital base?
→ When the amount of debt in relation to equity increases
When an institution's credit rating is downgraded
When the institution loses a large quantity of its customers in a short amount of time
When the institution gives out a lot of large loans
When the institution experiences a large influx of new equity
Cash, investments, accounts receivable, and inventory are also known as
Good financial managers minimize the amount of cash available to pay bills in
→ transaction balances.
If the interest rate on a loan changes according to the daily average of the prime rate over the life of the loan, the interest rate is said to be
Securities markets provide all of the following except
a mechanism for buying and selling stocks and bonds.
the primary market where firms raise capital.
→ a federally insured place to deposit savings.
a secondary market.
Which of the following is a stock market performance measure that compares current stock prices with those in a specified base period?
Dow Jones Industrial Average
If a firm tries to produce goods just in time to meet sales demand, its level of inventory will tend to be
→ relatively low.
Which of the following is a sequence of small bond issues of progressively longer maturity?
→ Serial bonds