Question 1

After paying its stockholders, a construction company decided to use the rest of its earnings to buy more buildings. What type of financing is this?

Accepted Answer

Using earnings to reinvest in the business, such as buying more buildings, instead of distributing them to shareholders, is referred to as retained earnings. This is a form of self-financing where the company uses its own profits to fund its operations or expansion.

Question 2

________ consist(s) of funds acquired from wealthy individuals and institutions that invest in promising start-ups or emerging companies in return for their giving up some ownership.

Accepted Answer

Venture capital consists of funds acquired from wealthy individuals and institutions that invest in promising start-ups or emerging companies in return for their giving up some ownership.

Question 3

What is the term for the rate of return a firm must earn to cover the cost of generating funds in the marketplace?

Accepted Answer

The term "cost of capital" refers to the rate of return a firm must earn on its investment projects to maintain its market value and cover the cost of generating funds in the marketplace. It encompasses the cost of debt and equity financing.

Question 4

Peer-to-peer lending, which allows individuals to borrow and lend money while bypassing financial institutions, is also called

Accepted Answer

Peer-to-peer lending is also known as social lending. It refers to the practice where individuals can lend money to other individuals without the need for a traditional financial intermediary, facilitating borrowing and lending mainly through online platforms.

Question 5

Joe's Barber Shop gives free haircuts to Manny, who brings Joe a free pastrami sandwich on Fridays. This demonstrates the concept of

Accepted Answer

This is an example of bartering, where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. In this case, a haircut is exchanged for a pastrami sandwich.

Question 6

Which statement demonstrates the money characteristic of portability?

Accepted Answer

Portability refers to the ease with which money can be transported and used in transactions. The statement "I can carry money with me" directly reflects this characteristic, as it emphasizes the ability to physically move money from one place to another easily.

Question 7

Which statement demonstrates the divisibility of money?

Accepted Answer

Divisibility of money refers to the ability to break down money into smaller units without losing its value. Statement B, "I can break big bills down into small ones," directly demonstrates this characteristic by indicating that larger denominations can be exchanged for equivalent values in smaller denominations.

Question 8

Which statement demonstrates the concept of durability as it relates to money?

Accepted Answer

Durability refers to the physical ability of money to withstand wear and tear and remain in use over time. Dollar bills lasting a long time is an example of this characteristic.

Question 9

Which statement demonstrates the concept of uniqueness as it relates to money?

Accepted Answer

The concept of uniqueness in relation to money refers to its ability to be distinct and not easily replicated, which is why the statement about dollar bills not being easily copied or counterfeited (D) demonstrates this concept. Counterfeit prevention features are essential for maintaining the integrity and trust in a currency.

Question 10

Which function of money is apparent when it makes economic transactions easier and eliminates the need to barter?

Accepted Answer

The function of money as a medium of exchange is apparent when it facilitates easier economic transactions by eliminating the need for barter, allowing goods and services to be traded more efficiently.

Question 11

Money can be used to measure the worth of goods and services. This relates to which function of money?

Accepted Answer

Money's function as a standard of value means it can be used to measure the worth of goods and services, providing a common basis for comparison.

Question 12

Money that can be accessed quickly and easily, such as that in a checking account, is called

Accepted Answer

M1 includes money that is readily accessible for transactions, such as the money in checking accounts, along with physical currency and other liquid assets.

Question 13

________ are bank funds that can't be withdrawn without notice or transferred by check.

Accepted Answer

Time deposits are bank funds that require notice before withdrawal and cannot be transferred by check. They are savings accounts or certificates of deposit (CDs) with a fixed term.

Question 14

What is a purpose of the Fed's administrative districts?

Accepted Answer

The Fed's administrative districts provide member banks with sufficient currency and other services, ensuring smooth operation of the banking system within their regions.

Question 15

All commercial banks are________, meaning they have received government permission to operate, either from the federal government (national banks) or an individual state (state banks).

Accepted Answer

Commercial banks are chartered, meaning they have received a specific form of authorization or license from the government (either federal or state) to operate as a bank. This charter outlines the rules and regulations under which they must operate.

Question 16

Which of these is a nonbank institution?

Accepted Answer

Brokerage firms are considered nonbank institutions because they do not accept deposits or offer traditional banking services like loans in the manner that banks do. Instead, they primarily deal with the buying and selling of securities for clients.

Question 17

A ________ is an account that pays interest and allows you to write an unlimited number of checks, but you have to maintain a minimum monthly balance.

Accepted Answer

A NOW (Negotiable Order of Withdrawal) account is a type of account that pays interest and allows for an unlimited number of checks to be written against the balance, but typically requires a minimum balance to be maintained.

Question 18

Rhonda has a ________ account, which gives her an interest rate competitive with those of brokerage firm money market funds but requires a higher minimum balance and limits check writing to three per month.

Accepted Answer

The correct answer is D) money market. Money market accounts typically offer higher interest rates similar to those of brokerage firm money market funds, require higher minimum balances, and often limit the number of checks that can be written per month, matching the description given.

Question 19

Alfred received a bonus and didn't need it for at least a year, so he wanted to put in somewhere where it would earn more interest than a savings account. What is thebest option for Alfred?

Accepted Answer

A certificate of deposit (CD) typically offers higher interest rates than savings accounts, especially for funds that can be left untouched for a set period, making it a suitable option for Alfred.

Question 20

Jasper started a new position last year. Since starting, he has been responsible for obtaining sufficient funds to complete several important projects for his employer. Jaspermost likely works in the field of ________ management.

Accepted Answer

Jasper's role involves obtaining sufficient funds to complete projects, which is a key responsibility in financial management. Financial management focuses on planning, organizing, directing, and controlling the financial activities such as procurement and utilization of funds of the enterprise.

Quiz 3: Fundamentals of Economics and Types of Markets