Unit 4 - Money Study guide and Review

Which of the following most accurately explains why fiat money has value?

• Fiat money has value because the government declares that it has value. 
• Fiat money has value because it is a precious metal that people value in itself.
• Fiat money has value because it allows people to barter for goods and services.
• Fiat money has value because it is a good that can be used for some purpose.

Which of the following statements best describes how investors behave when engaged in socially responsible investing?

• vote for a board of directors that will behave legally and ethically
• invest in companies with a business model and social mission that they support
• give a large percentage of their earnings to charities
• attempt to maximize profits for society instead of for individuals

The three tools of monetary policy are: (1) changing the required reserve ratio, (2) adjusting the discount rate, and (3)

• using open-market operations
• influencing the currency exchange
• organizing democratic elections
• applying the law of supply and demand

Which of the following factors would be most likely to lead to a successful IPO?

• risky-sounding prospectus
• bullish market conditions
• brand new approach to business
• history of good profits

Monetary policy in the United States is carried out primarily by which of the following agencies?

• Department of the Treasury
• Small Business Association
• Federal Reserve Bank
• U.S. Mint

Which describes a bubble?

• stock prices being higher than their real value
• major decrease in stock prices
• general upward trend in stock prices
• general downward trend in stock prices

Which is an example of debt financing?

• money from an angel investor
• bank loan
• scheduling an IPO
• sale of company shares

The three main functions of money are: (1) medium of exchange, (2) standard of value and (3)

• credit value
• statement of financial position
• storehouse of value
• a person's total financial value

Which of the following best describes a dividend?

• percentage ownership of a corporation
• difference between costs and revenues
• share of a company's profit paid to each stockholder
• increase in a person's investment

Which of the following actions is most likely to result in a decrease in the money supply?

• The government sells a new batch of Treasury bonds.
• The discount rate on overnight loans is lowered.
• The Federal Reserve Bank buys Treasury bonds.
• The required reserve ration for banks is decreased.