When inflation is very high, money is no longer a __________________ means of exchange.
portable durable difficult to counterfeit → stable divisible
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. time deposit. banker's acceptance. 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. transaction. 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
When currency is stable, it provides no incentive to save.
Cash, investments, accounts receivable, and inventory are also known as
*current assets. current liabilities. long-term liabilities. fixed assets. long-term assets.
Fixed assets, such as production facilities, are expected to last for many years.
Good financial managers minimize the amount of cash available to pay bills in
→ transaction balances. marketable securities. the float. banker's acceptances. inventory.
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