Economics
Chapter 11 and 12 Review
Part I: Vocabulary
Test Friday November 13, 2009
Bring a pencil with you for the test
Vocabulary: Please define the following. Suggestion: create flashcards for easy
review of vocabulary.
Chapter 11:
1. Money:
any substance that serves as a medium of exchange, a measure of
value, and a store of value
2. Medium of Exchange:
something accepted by all parties as payment for
goods and services
3. Measure of Value:
a common denominator that can be used to express
worth in terms that most individuals understand
4. Fiat Money :
5.
Specie:
money by government decree
money in the form of coins made from silver or gold
6. Monetary Standard: Mechanism designed to keep the money supply
portable, durable, divisible, and limited in supply
7. Legal Tender: Fiat currency that must be accepted in payment for debts
8. Treasury Coin Notes : Paper currency issued by the Treasury that was
redeemable in both gold and silver
9. Gold Standard;
Monetary standard under which the basic currency unit is
equivalent to, and can be exchanged for, a specific amount of gold
10.Inconvertible Fiat Money Standard :
A monetary standard under
which the fiat money supply cannot be converted into gold or silver by its
citizens
11.Federal Reserve System: System that functions as the central bank of the
United States
12.Mutual Savings Bank :
Depositor-owned financial organization operated
only for the benefit of its depositors
13.Credit Union :
Non-profit service cooperative that is owned by, and
operated for, the benefit of its members
14.Savings and Loan association :
Depository institution that invest the
majority of its funds in home mortgages
Chapter 12:
15.Financial System:
Network of savers, investors, and financial institutions
that work together to transfer savings to investors
16.Financial Assets:
17.Mutual Fund:
Claims on the property and the income of the borrower
Company that sells stock in itself to individual investors and
invest this money in other stocks and bonds
18.401K Plan:
A tax-deferred investment and savings plan that acts as a
personal pension fund for employees
19.CD’s:
Loans investors make to financial institutions
20.Junk Bonds:
Exceptionally risky bonds
21.Municipal Bonds :
Bonds issues by state and local governments
22.IRAs: Long term, tax sheltered time deposits that an employee can set up as
part of a retirement plan
Economics
Chapter 11 and 12 Review
Part II: Practice Questions
Test Friday November 13, 2009
Bring a pencil with you for the test
Answer the following questions. If it ask for an example try and
identify two or three.
1. What are the functions of money?
a. Store of value, a medium of exchange, measure of value
2. What did early colonists in Virginia use tobacco as?
a. Commodity money
3. What is the origin of the American dollar (modeled after two countries money)?
a. The Spanish Peso and the Austrian taler
4. Medium of Exchange must be _______________, _______________, and
_________________.
a. Portable, durable, easily divisible
5. Under what monetary stand is the United States today?
a. The inconvertible fiat money standard
6. Why were Greenbacks and US notes issued?
a. Raise money to finance the Civil War
7. What is the National Banking system and when was it created?
a. During the Civil War, made up of banks chartered by the federal
government, resulted in shifting the paper money supply from being
entirely private-issued to being entirely publicly-issues
8. What is the Federal Reserve System?
a. Publically controlled ; system that functions as the central bank of the
United States
9. What is the FDIC?
a. Federal agency that insures bank deposits in the even of a bank
failure; insures your deposits up to a certain amount
10. Savings and Loan Associations experienced ___________ and __________
during the 1980’s.
a. Crisis and reform
11. Saving is necessary for _______________________
a. Capital formation
12. What are financial intermediaries? Give Examples
a. Financial institutions that bring together funds that savers provide
and then lend those to others; Mutual funds, financial systems,
financial assets
13. Give Examples of Financial assets.
a. Bonds, Savings bonds, certificates of deposit
14. Finance companies, Life insurance companies, and Real estate investment
deposits, are examples of _______________________________________.
a. Financial institutions
15. What are the main components of bonds?
a. Coupon, maturity, par value
16. A bond principal is called ________________.
a. Par value
17. What is a capital market?
a. A market which money is loaned for periods of more than one year
18. How is a bonds yield calculated?
a. Dividing the annual interest by the purchase price
19. Finish the following statements
a. Receive a high return = ___High__ risk
b. Receive a low return = ______Low______ risk
20. Where are the majority of US stocks traded?
a. the over-the-counter market
21. List Examples of Securities Exchange
a. NYSE, AMEX, and Chicago’s Stock Exchange
22. Which stock market’s performance does the Dow-Jones Industrial Average
reflect?
a. NYSE
23. What are some examples of futures trading?
a. A futures contract, call option, or a put option