Economics Assessment
1- What is one disadvantage of bartering over using currency to purchase goods?
One disadvantage is the absence of a proper and convenient means of storing wealth or value.
2- Why do objects used as money need to be in limited supply?
In order to maintain its value.
3- What does it mean to say that money is an acceptable form of payment?
A person that accepts money as a form of payment can use it for something else.
4- What are the six characteristics of money?
durability; portability; divisibility; uniformity; limited supply; acceptability.
5- If you write your friend an IOU for a loan of twenty dollars, what type of money have you given her?
You have given her Representative Money.
1- What did the federalists, led by Alexander Hamilton, believe about the new nation's system of
banking?
They believed that a centralized banking system was key to promoting industry and trade.
2- What was one effect of President Jackson's veto of the Second Bank of the United States?
The Free Banking Era begins.
3- What was the gold standard?
It was a monetary system in which paper money and coins had the value of certain amounts of
gold.
4- What were the effects of the government policies that limited people's ability to redeem paper
money for gold during the Depression?
There was an increase in gold value and decrease in the value of the dollar.
5- What might have happened if banks had not issued large numbers of subprime loans in the
1990s and early 2000s?
Subprime loan : a type of loan offered at a rate above prime to individuals who do not qualify for
prime-rate loans, Without the banks' issuing of subprime loans, it may have decreased the
effect of the mortgage crisis.
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1- Describe a situation in which a person would need a mortgage from a bank.
One situation would be where a person wants to buy some real estate and can't afford the total
cost. They would take out a mortgage loan for the cost of the house minus the deposit.
2- When would you pay interest?
When you borrow money.
3- List at least three services that are available through home banking over the internet.
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Check transactions such as bank statements.
Transfer or receive money online.
Check balance, and other currencies rate.
Pay bills
4- (a) What kinds of money are included in M1 and M2? (b) Why do economists use these
different categories?
M1 represents money that people can gain access to easily and consists of assets and liquidity.
M2 consists of all of M1's assets plus several additional assets. They make up the money
supply of the US.
5- (a) In what ways are debit cards and stored-value cards similar? (b) How are they different?
Prepaid cards, often known as stored-value cards, are comparable to debit cards in terms of
functionality. The distinction is in how they're funded:
instead of being linked directly to a consumer’s bank account, stored value cards are funded in
advance. Stored-value cards are a common way for users to pay because of their simplicity,
and flexibility.
1- What role do financial intermediaries play in the free enterprise system?
Financial intermediaries help channel funds from savers to borrowers.
2- What relationship does risk have to return?
The government does not insure you against the risk of an investment gone bad. You may
benefit from the rewards of a good investment, but you face the risks of a bad one.
3- (a) How are mutual funds and hedge funds similar? (b) How are they different?
A mutual fund pools the savings of many individuals and invests this money in a variety of
stocks, bonds, and other financial assets. A hedge fund is a private investment organization that
employs risky strategies that often make huge profits for investors.
Both funds are similar because they fall under financial intermediaries (institutions that help
channel funds from savers to borrowers).
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4- What role do households play in the financial system?
In the financial system, households, individuals, and small businesses lend out their savings in
return for financial assets. Households play the role of an investor.
5- If you had $500 to invest, what questions would you have as you decided how to invest your
money?
1. "What should I invest my money towards?"
2. "What is a crucial priority in my life right now?"
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