QUESTION What are the three functions of money? What will be an ideal response? ANSWER Answer: Money acts as a medium of exchange, as a store of wealth, and as a standard of value. Explanation: Money has three functions: (1) it acts as a medium of exchange, (2) it acts as a store of […]
Date: September 3rd, 2020
QUESTION What is the U.S. money supply? What will be an ideal response? ANSWER Answer: The U.S. money supply is defined as the amount of money the Federal Reserve System makes available for people to buy goods and services. The money supply is customarily referred to in two ways—as M1, the narrowest measure, or […]
Date: September 3rd, 2020
QUESTION Why is it sometimes cheaper for firms to sell stock privately than publicly? What will be an ideal response? ANSWER Answer: Firms may find they can sell stock more cheaply when they sell it privately because there is less government regulation involved. Explanation: As there is more government regulation involved in selling stock […]
Date: September 3rd, 2020
QUESTION How do commercial banks make money? What will be an ideal response? ANSWER Answer: Commercial banks make money in three ways: (1) by charging interest on loans, (2) by charging fees for other services, and (3) by offering other financial products. Explanation: Commercial banks make money in three ways: (1) by charging interest […]
Date: September 3rd, 2020
QUESTION Why do you think it is important that we have a Federal Reserve Board? What will be an ideal response? ANSWER Answer: The Federal Reserve Board of Governors works with the president’s administration to formulate economic policy. Chief among their responsibilities is to set monetary policy, using interest rates and other tools to […]
Date: September 3rd, 2020
QUESTION What is the reserve requirement? What will be an ideal response? ANSWER Answer: The reserve requirement says that a bank must reserve as cash (as vault cash or in a Federal Reserve bank account) 3% to 10% of whatever funds it has in ordinary checking or savings accounts, called transaction accounts. Explanation: The […]
Date: September 3rd, 2020
QUESTION How do you think derivatives helped cause the 2008 financial meltdown? What will be an ideal response? ANSWER Answer: Derivatives required the use of computers, which led to financial products that were far too complex, making it difficult to properly value them. These complex, difficult-to-value products were then sold to others, and yet […]
Date: September 3rd, 2020
QUESTION Which of the following, if true, undermines Groh’s point about diversification? A) Not every investor can afford every stock. B) The value of some stocks drop and never recover. C) When one stock value drops, others tend to also drop. D) Some investors prefer as little risk as possible when investing. E) The value […]
Date: September 3rd, 2020
QUESTION Which of the following assumptions does Ryerson have to make to support his statements? A) Some people make money by investing. B) Interest is the only thing that changes the value of a savings account. C) Most people want to save money instead of spending it. D) Companies issue stock only if there is […]
Date: September 3rd, 2020
QUESTION Greenmax’s chief financial officer likes the idea of expanding into markets in the southern hemisphere because he argues that this will help the company generate a consistent year-round cash flow. Which of the following, if true, strengthens the CFO’s argument? A) Energy drinks are popular in many different parts of the world. B) Demand […]
Date: September 3rd, 2020
