Financial Articles (a-e) Quiz

What was the median household income according to the 2015 U.S. Census?

$56,000

People who work hard, live below their means, and start saving early will likely become what?

Millionaires

Walter Bagehot thought that it was whose job to hold the gold so that all the smaller banks did not have to?

Bank of England (central bank)

If your investments are too conservative (safe), you will earn a much smaller return on investment (ROI), and therefore adopting a more aggressive long-term investment strategy that is comprised mostly of __________ is the key to growing wealth.

Stocks

Ideally, you should save what percentage of your salary each year for retirement, regardless of how much you earn?

10%

What term describes when customers simultaneously come to a fractional-reserve banking system financial institution and demand their paper money be converted to its metal equivalent?

Bank run

By one estimate, John Law's French bank had about how many times as much paper bank notes in circulation as its gold and silver reserves making it a precursor to the banking system that is normal today?

Four

In order to pay for the Nine-Year's War, King William's administration borrowed huge sums of money and used what to pay the loans back with interest?

Taxes

What term describes the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals and is also a tool used by the central bank to increase or decrease the money supply in the economy?

Reserve requirements

What 17th century English innovation was a receipt for deposits of gold from the public, was as good as gold money, and rapidly became a generally accepted new currency?

Representative money bank notes

Americans who aspire to become wealthy may be surprised that they do not need what?

All answers are correct

In 1692, John Law observed how the English government was paid for by long-term debt and paper money and he marveled at what stimulating effects of paper money?

All answers are correct

Genghis Khan's grandson took measures to insure the authenticity of his currency and what was the punishment if anyone forged it or would not accept it as payment?

Death

Victorian banker-journalist Walter Bagehot examined the difference in the appearance of bank solidity and the reality that Victorian banks kept going bankrupt and he concluded that the cause of these multiple bank crises were due to what?

Lending money to people who cannot pay it back

John Law thought that the crucial thing was to get money moving around the economy and to use it to stimulate trade and what?

Business

Which new invention, backed by the authority of the state, did Kublai Khan implement in 1260?

Paper money

What is the biggest factor that determines whether you can save $1 million for retirement on an average salary?

The age when you started investing

When the deeply indebted King of France, Louis XIV, died in 1715, John Law advised the new child King's regent that what is "not the value FOR which good are exchanged, but the value BY which they are exchanged?"

Money

In America today, whose role is it to guarantee the profitability of banks and be "the lender of last resort" in a time of crisis?

The Federal Reserve

In 1694, the English government borrowed 1.2 million pounds at a rate of 8% and in return the lenders were allowed to incorporate themselves into what new company?

Bank of England

What type of modern day banking system functions by requiring banks to only hold a fraction of the money their customers' deposit as reserves which allows them to use the rest of it to make loans and thereby essentially create new money?

Fractional-reserve banking system

What type of job would most likely enable achievement of millionaire status?

All answers are correct

In 1689, the English King William's administration had to solve the problem of how to pay for what against King Louis XIV of France?

War

In modern day banking, the less equity (money) the bank needs to keep as a margin of safety, the more money it could lend, and, therefore the more the bank can __________.

Profit

Eight out of ten millionaires reach that milestone through what vehicle?

401(k)

What would be the result if you had invested the $60,000 you would have spent on a luxury car for 30 years with a 7% annual rate of return instead?

It would be worth about $490,000

One of the biggest mistakes made is not understanding the threat associated with _________ which prevents you from growing your money.

Debt ?

John Law's ideas led him to the idea of a new national French bank that took in gold and silver from the public and lent it back out in what form?

Fiat money bank notes

Walter Bagehot wrote that "the main source of profitableness of established banking is the smallness" of what?

Requisite (required) capital

If a person earning the median household income invests $5,500 per year ($458 per month) from age 37 to 67 (30 years) with an 8% return, what would be the grand total at retirement?

$622,000

According to Walter Bagehot, gold was essential in order to guarantee __________, but small banks do not want gold taking up valuable space on their balance sheet and they believe that the government (central bank) should store the gold to guarantee __________.

Currency

Today, every nation-state uses a version of John Law's system of what and has a central bank that issues paper money, manipulates the supply of credit in the interest of commerce (trade), uses fractional-reserve banking, and features joint-stock companies that pay dividends.

Insurance ?

If a person earning the median household income invests $5,500 per year ($458 per month) from age 27 to 67 (40 years) with an 2% return, what would be the grand total at retirement?

$332,000

What doctrine is seen by some as the seed to the too-big-to-fail doctrine, socialized financial risk, and the Federal Deposit Insurance Corporation (FDIC) which protects peoples' bank deposits up to $250,000?

Lender of last resort

According to Walter Bagehot, gold was the only form of money and all other forms of currency in the system were merely different kinds of__________ which was indispensable to a functional economy but was not really money because it was not gold, which underpinned the value of everything else.

Credit

If a person earning the median household income invests $5,500 per year ($458 per month) from age 27 to 67 (40 years) with an 8% return, what would be the grand total at retirement?

$1.4 million

Walter Bagehot believed that smaller banks should take deposits, make loans, and issue paper money and if they got into trouble the central bank would do what?

Oversee the monetary system ?

Financial experts urge people to start investing early in their careers in order to take advantage of __________ which is the concept of earning interest on interest.

Compounding

At what age would you have to start investing if you were to have $1 million by only investing about $442 per month, every month, until the average retirement age of 63 years old?

25

John Law's new system of finance banned the use of gold and silver and was replaced by paper money that was described as what type of currency underpinned by the authority of the central bank and nothing else?

Fiat money