Unit 5B Vocabulary

Front

What is not considered one of the three main functions of money? Medium of exchange, Store of value, Unit of account, Generator of wealth

Back

Generator of wealth

Answer explanation

The three main functions of money are medium of exchange, store of value, and unit of account. 'Generator of wealth' is not one of these functions, as money itself does not create wealth.

Front

Which of the following best describes a commercial bank? A bank that only serves government employees, A financial institution that accepts deposits and offers loans to the general public, A credit union that charges interest on savings, An online-only lending platform

Back

A financial institution that accepts deposits and offers loans to the general public

Answer explanation

A commercial bank is defined as a financial institution that accepts deposits and offers loans to the general public, making this option the best description. The other choices do not accurately represent a commercial bank.

Front

What is a key difference between a credit union and a commercial bank?

Back

Credit unions are owned by their members.

Answer explanation

A key difference is that credit unions are owned by their members, making them member-focused, while commercial banks are for-profit institutions owned by shareholders.

Front

What service does a payday lender typically offer?

Back

Small, high-interest loans due on your next payday

Answer explanation

A payday lender typically offers small, high-interest loans that are due on your next payday, providing quick cash to borrowers who need immediate funds.

Front

Which best describes a title pawn lender?

Back

Offers loans in exchange for your vehicle title as collateral

Answer explanation

A title pawn lender provides loans by using your vehicle title as collateral. This means if you default, they can take possession of your vehicle. The other options do not accurately describe this type of lender.

Front

What distinguishes a debit card from a credit card?

Back

It uses funds directly from your checking account.

Answer explanation

A debit card uses funds directly from your checking account, allowing you to spend only what you have. In contrast, a credit card borrows money from the bank, which you must pay back later.

Front

What happens when you use a credit card?

Back

You are borrowing money from the card issuer.

Answer explanation

When you use a credit card, you are borrowing money from the card issuer to make purchases. This means you are not paying instantly from your savings, and you may incur interest charges if the balance is not paid in full.

Front

What is the main function of mobile payment apps like Venmo or Apple Pay?

Back

Transferring money digitally via smartphones

Answer explanation

The main function of mobile payment apps like Venmo or Apple Pay is transferring money digitally via smartphones, allowing users to send and receive funds quickly and conveniently.

Front

What is the basic idea behind the risk/return tradeoff?

Back

Greater risk may lead to greater potential return

Answer explanation

The risk/return tradeoff suggests that greater risk may lead to greater potential return. Investments with higher risk can yield higher returns, while safer investments typically offer lower returns.

Front

What is a main characteristic of a savings account?

Back

Safe place to store money with minimal interest earnings

Answer explanation

A savings account is primarily characterized as a safe place to store money, offering minimal interest earnings. It is low risk, unlike options with high returns, and does not require stock market investments.