REVIEW QUESTIONS
- How do economists define equilibrium in financial markets?
- What would be a sign of a shortage in financial markets?
- Would usury laws help or hinder resolution of a shortage in financial markets?
- If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?
- Which of the following changes in the financial market will lead to a decline in interest rates:
- a rise in demand
- a fall in demand
- a rise in supply
- a fall in supply
- Which of the following changes in the financial market will lead to an increase in the quantity of loans made and received:
- a rise in demand
- a fall in demand
- a rise in supply
- a fall in supply
- What are the most common ways for start-up firms to raise financial capital?
- Why can firms not just use their own profits for financial capital, with no need for outside investors?
- Why are banks more willing to lend to well-established firms?
- What is a bond?
- What does a share of stock represent?
- When do firms receive money from a stock sale in their firm and when do they not receive money?
- What is a dividend?
- What is a capital gain?
- What is the difference between a private company and a public company?
- How do the shareholders who own a company choose the actual company managers?
- Why are banks called “financial intermediaries”?
- Name several different kinds of bank account. How are they different?
- Why are bonds somewhat risky to buy, even though they make predetermined payments based on a fixed rate of interest?
- Why should a financial investor care about diversification?
- What is a mutual fund?
- What is an index fund?
- How is buying a house to live in a type of financial investment?
- Why is it hard to forecast future movements in stock prices?
- What are the two key choices U.S. citizens need to make that determines their relative wealth?
- Is investing in housing always a very safe investment?