Name:___________________

Period:____

Unit 3 Review Guide

Chapter 10-16
Be able to define and apply the following concepts.
Chapter 10
1. What type of system existed before the invention of money?
o What was the problem with this system?
2. What are the THREE functions of money AND explain each?

3. What is the official term for our money?

4. What are the THREE aspects that make up our money supply?

o What is the most common form today?

5. Are credit cards considered part of the money supply? Why or why not?

6. Define the term: Demand Deposit.

7. Define the term: Fractional Banking.

Chapter 11
8. What are the THREE aspects one must always consider when investing AND what would
you want in an ideal situation (high or low)?

9. What are the THREE major stock markets in the United States?

o Which stock market has no physical location (completely electronic)?

10. What is the purpose of the Dow and S&P 500?
11. Why do corporations sell stock?
12. Why do people buy stock?
13. What are the TWO ways to buy stocks AND explain each?

14. When investing in the stock market, one should do so for the __________________ term.
15. In terms of risk, reward, and liquidity- Which one must you give up for stocks?
16. What are mutual funds?
17. What is a bond?
18. What are the THREE types of bonds? Mark which bond is the riskiest and which bond is the safest.

19. Why would companies rather issue bonds over stocks?

20. In terms of risk, reward, and liquidity- Which one must you give up for bonds?
21. What are the THREE rules to building wealth?

22. What is the Rule of 72?

o Example: How long will it take your $11,000 CD to double with an interest rate of 8%?
23. How does compound interest work?
24. In terms of risk, reward, and liquidity- Which one must you give up for CDs?
25. In terms of risk, reward, and liquidity- Which one must you give up for a savings account?
26. Draw the risk pyramid.

Chapter 12 & 13
27. What is considered a typical (normal) unemployment rate?
28. What is cyclical unemployment?
29. What is frictional unemployment?
30. What is structural unemployment?
31. What is seasonal unemployment?
32. Define the term- GDP (Gross Domestic Product).
33. What does CPI measure?
34. What are the TWO major ways we utilize GDP?

35. Why do we not include certain things when we are computing GDP?
36. What is the equation when computing GDP?
37. What is inflation?
38. What happens to the value of the dollar when inflation occurs?
39. What is the business cycle based on?
40. Draw and label the business cycle.

41. What happens during the expansion/recovery phase of the business cycle?

42. What happens during the peak phase of the business cycle?
43. What happens during the recession/contraction phase of the business cycle?

44. What happens during the trough phase of the business cycle?
45. What is the multiplier effect?
46. What are the FIVE aspects that cause the business cycle to move?

Chapter 14 & 15
47. What date are taxes due (must be post marked to the IRS)?

48. What is the largest tax on Americans?

49. What is the problem with social security?
50. What is the difference between mandatory and discriminatory federal spending?

51. Is the federal government budget working at a surplus or deficit?

52. What are the TWO primary ways to fix our national debt problem?

53. Define the term- Tax Incentive.

54. What is a proportional (flat) tax?

o The __________________________ government uses this type of tax system.

55. What is a progressive tax?

o The __________________________ government uses this type of tax system.

Chapter 16
56. What is the objective of the Federal Reserve System (The Fed)?
57. Who is the current chairman of the Fed?
58. What are the TWO things that the Fed fights?
59. What are the SEVEN functions of the Fed?

60. What is the purpose of the Federal Deposit Insurance Corporation (FDIC)?
61. The Fed can change the money supply in three ways. Explain how they function
o Change the Reserve Requirement-

o Open Market Operations-

o Change the Discount Rate-

62. Who makes fiscal policy?

63. Who makes monetary policy?