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ECON CH 11 QUIZ 2016
Mr. Stickler's Liberty Christian ECON Ch. 11 Quiz Flashcards 2016
| Question | Answer |
|---|---|
| What does the term "savings" mean/ refer to? | This term refers to "the dollars that become available when people abstain from consumption". (Pg. 289) |
| What is a "certificate of deposit"? | This is a document showing that an investor has made an interest - bearing loan to a bank. (Pg. 290) |
| What are "financial assets"? | These are "claims on property and the income of the borrower". (Pg. 290) |
| What does the term "financial system" mean/ refer to? | This term refers to "a network of savers, investors, and financial institutions that work together to transfer savings to investors". (Pg. 290) |
| What are "financial intermediaries"? | These are "the institutions that lend the funds that savers provide". (Pg. 291) |
| What are the three (3) parts of the "financial system"? | 1.) The funds that a saver transfers to a borrower; 2.) Financial assets that certify conditions of a loan; 3.) The surplus of funds and financial assets together. (Pg. 290) |
| What does the term "nonbank financial institution" mean/ refer to? | These are "depository institutions that channel savings to borrowers". Examples include: life insurance companies, pension funds, and finance companies. (Pg. 292) |
| What does the term "finance company" mean/ refer to? | This term refers to "firms that specialize in making loans directly to consumers. They also buy installment contracts from merchants who sell goods on credit." (pg. 292) |
| What is a "premium"? | This is "the price that the insured pays for their insurance policy, usually paid monthly, quarterly, or annually for the length of the protection contract". (Pg. 292) |
| What does the term "pension" mean/ refer to? | This term refers to "a regular payment intended to provide income security to someone who has worked a certain number of years, reached a specific age, or suffered a particular injury". (Pg. 292) |
| What is a "pension fund"? | This is a fund set up to collect income and disburse payments to those persons eligible for retirement, old-age, or disability benefits. (Pg. 292) |
| How is "current yield" computed? | This is computed by dividing the annual interest by the purchase price of a bond. (Pg. 297) |
| What is a "bond"? | This is a "formal long-term contract that requires repayment of borrowed money & interest on the borrowed funded at regular intervals over time". (Pg. 297) |
| What are "municipal bonds"? | These are bonds issued by state and local governments. (Pg. 299) |
| What are "treasury bonds"? | These are bonds that are issued by the U.S. government with maturities of 10 to 30 years. (Pg. 301) |
| What are "treasury bills"? | These are short-term obligations with a maturity of 4, 13, or 26 weeks and a minimum denomination of $1,000. (Pg. 301) |
| What are "mutual funds"? | These are ". . . investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.” (Notes) |
| List one (1) advantage of investing in mutual funds. | One (1) advantage of doing this is that there is a highly trained "fund manager" who monitors all of the stocks in the fund for you. Another is that mutual funds are already diversified, so investors don't need to do this themselves. (Notes.) |
| What is one (1) disadvantage of investing in mutual funds? | One (1) disadvantage of investing in these is that decisions about which stocks the fund contains are out of the investor's control. (Notes.) |
| List three (3) things to consider before investing in mutual funds. | 1.) The fund manager's experience; 2.) The financial sector that the mutual fund is invested in; 3.) The performance history of the mutual fund in terms of % gains and/ or loses. (Notes.) |
| What is the difference between a "primary" and a "secondary market"? | A "primary market" is a market where only the original issuer can sell or repurchase a financial asset; a "secondary market" is a market where a financial asset can be sold to someone other than the original issuer. (Pg. 3030 |
| What is the difference between a "bull" and a "bear market"? | A "bull market" is also known as a "strong" market because prices have been increasing for several months or years in a row; a "bear market" is a "mean" market in which prices have fallen sharply for several months or years. (Pg. 310) |
| What is the ". . . most popular and widely publicized measure of stock market performance?" | The "Dow Jones Industrial Average" is the most popular measure of stock market performance. (Pg. 310) |
| What does the term "option" mean/ refer to? | This term refers to a "special type of futures contract that gives the buyer the right to cancel the contract". (Pg. 311) |
| What does the term "futures contract" mean/ refer to? | This term refers to "an agreement to buy or sell at a specific future date at a predetermined price". (Ex: You might agree to buy gold at $580 an oz. in 6 months, hoping that the actual price will be higher when the date arrives.) (Pg. 311) |
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