Text of the Unit III Review

What are two of the main benefits of a sole proprietorship?
ease of start up, full personal control, exclusive right to the profits
What are three of the disadvantages of a sole proprietorship?
unlimited liability, sole responsibility, limited growth potential, lack of longevity
What are two advantages of partnerships?
easy start up, specialization, shared decision making, shared losses
What are two disadvantages of partnership?
unlimited liability, potential for conflict, lack of longevity
What is a horizontal corporate combination? A vertical combination?
horizontal: all in same phase of production, vertical: all in different phases of production
What is the name for a group of businesses that share a name and product line but are individually owned?
franchises
What is a cooperative?
a business that is owned by its customers (REI, the Green Bay Packers)
What are three advantages of a Franchise?
Standardized quality, national advertising, financial assistance, management training
What are three disadvantages of a Franchise?
High franchising fees, strict operating standards, only buy supplies from parent company, can only sell approved products
Who owns a corporation? Who do they elect?
Shareholders, board of directors
What are three factors considered by workers as they enter the labor force?
wages, needed skills, working conditions, location, intrinsic rewards, market trends
What are two of the key changes in the labor force over the last century?
more women, more capital intensive economy, higher overall education level
What is the theory that a college education increases productivity and results in higher wages?
Learning Effect
What is the theory that a person who completes a college degree is intelligent and hardworking?
Screening Effect
What are the two key types of laws governments passed in the last 50 years to protect workers?
anti-discrimination and minimum wage laws
What was the first large scale union in the United States? Who did it attempt to organize?
Knights of Labor, all workers
What was the first relatively successful union in the United States? Who did it attempt to organize?
American Federation of Labor (AFL), skilled workers
Which national union sought to organize workers across entire industries?
CIO
A law that bans the mandatory union membership
Right-to-work laws
What are factors that contributed to the decline of the labor union?
Decrease of manufacturing jobs, increase of white-collar jobs, industries move to South, more women in labor force
When the union negotiates with the management is
Collective Bargaining
What are two of the biggest challenges unions face?
employer opposition, changing employment patterns, negative public opinion
What are the two ways of making money on a share of stock?
dividends and appreciation (capital gain)
What does a “future” represent?
the right to buy a commodity in the future at a set price
What are the two main types of bonds? Are they generally more or less risky than stocks?
government and corporate, less
What are the three basic functions of money?
Medium of exchange, standard of value, store of value
Name 3 of the necessary characteristics of money.
Durability, portability, divisibility, stability of value, and acceptability
What is representative money?
When the money actually represents a valuable commodity
What is fiat money? Name a major country that uses this form.
When money has value b/c of government decree, the U.S.
What are the three components of Bonds?
Coupon rate, maturity, par value
What are low risk ways to invest money?
Money market account, CD’s, savings bonds, savings accounts
What is the strategy that spreads out investments to reduce risk?
Diversification
What are mutual funds?
Pools the savings of many individuals and invests money in a variety of stocks
What are the two ways stockholders can make a profit?
Dividends, capital gains
What are the contracts that give investors the choice to buy or sell stock?
Options
What does the S&P 500 measure?
It tracks the price changes of 500 different stocks to measure the overall stock market performance
What lead to the stock market crash of 1929?
Buying on the margin, speculation, farmers struggling
What U.S. president dismantled the first national bank?
Andrew Jackson
Which period of U.S. history has been marked by reform and regulation in the Banking industry?
The last 90 years
Name two New Deal banking reforms.
FDIC, can’t sell securities, can’t redeem dollars for gold, margin & reserve limits
Identify three ways automation is changing the banking industry.
ATM machines, POS/Debit transactions, Online banking, Automated Clearinghouse transactions
What was the S & L crisis of the late 1980’s?
Many S & L’s went under because of bad loans & help from Congress that loosened their regulations
What major change in Federal banking was caused by the Panic of 1907?
The Federal Reserve System (FED)
How many FED district banks are there? Who do they supervise?
12, the member banks in their respective regions
What is the primary influence the FED has over the economy?
They can regulate the money supply