Exam 14: Money and Banking

According to the Big Mac index Big Mac's must be priced higher in China than in Canada. the price of a Big Mac is used to determine if a given currency is overvalued or undervalued. Big Mac's are better than Mom's homemade hamburgers. Big Mac's are always cheaper in France than they are in Canada. Big Mac's are priced the same all over the world.

If Chris takes the money from her paycheque and gives half of it to her landlord to pay last month's rent, how is she using the money? As a unit of account As a store of value As a source of currency As a medium of exchange As a standard of value

Sally opened a small boutique. Unfortunately, she had no credit and her suppliers wished to be paid immediately. Sally did not like to carry cash, so she paid by writing cheques on her term deposit account. writing cheques on her demand deposit account. using a banker's acceptance. writing a promissory note. using a letter of credit.

Explain why beef would not make an appropriate form of currency in modern society.

Which of the following accounts for nearly all the nation's money supply? M-1 Currency Demand deposits Currency plus demand deposits M-2

The characteristics of money are divisible, interchangeable, portable, and exchangeable. durable, paper, coin, and stable. interchangeable, divisible, paper, and banks. durable, divisible, stable, and portable. portable, divisible, durable, and interchangeable.

Canadian Heritage, an investment company that groups together pools of assets, showed an average return of 44% for the last three months. Canadian Heritage set up ________ for its investors. time deposits money market mutual funds demand deposits hedge funds term deposits

A personal chequing account represents demand deposits because the bank must pay "on demand" to the person receiving the cheque.

A ________ is a privately owned, profit-seeking firm that serves individuals, non-business organizations, and businesses as a financial intermediary. pension fund credit union chartered bank trustee trust company

The law of one price says that the supply and demand of a product must not alter its price. says that if a retailer puts an item on sale, all other retailers must match that price. says that identical products should sell for the same price in all countries. is a principle suggested by Canadian economists that means that all identical products in a given economy should be sold for the same price. is the principle that to be competitive, a company must offer its product at only one price, that is, it should not negotiate with customers about the price.

The United Nations agency that provides a limited scope of financial services, such as funding national improvements in developing countries is the International Monetary Fund (IMF). Interbank Bank. World Bank. Bank of Canada. Global Bank.

When the money supply is high, the value of the dollar rises.

Describe the functions of the Bank of Canada and describe the tools it uses to control the money supply.

The law of one price says that almost all countries will have a trade deficit. identical products should sell for the same price in all countries. a good must be available for the same price in every province in Canada. the price of a Rolex watch is the same in all countries. all currencies are over-valued.

Subprime loans have higher interest rates than conventional loans. Subprime loans are designed for borrowers with low credit scores who would not qualify for conventional loans. The borrower pays a higher rate to compensate the lender for the greater risk of a default. Subprime loans typically have adjustable rates, meaning that the interest rate can change over the life of the loan. Borrowers who take out adjustable subprime loans usually try to keep the rate as low as possible at the start of the loan, even when doing so would lead to higher payments over the entire life of the loan. After a large number of people defaulted on their subprime loans, research revealed that the majority of people who took out subprime loans could have qualified for conventional loans. The statements above most strongly suggest that if all subprime loan borrowers had taken out the loan that was most appropriate for their needs, then what would have been the outcome? None of them would have taken out an adjustable loan. None of them would have taken out a subprime loan. Most of them would have paid less in interest. Most of them would have taken out a conventional loan to cover any expenses not covered by a subprime loan. Most of them would have paid money at the start of the loan in order to get a reduced interest rate over the life of the loan.

Heather told her friends she just bought $1000 worth of new clothes. Heather's statement illustrates the "unit of account" function of money.

The main function of financial institutions is to facilitate the flow of money from sectors with surpluses to those with deficits.

How are the World Bank and the International Monetary Fund different?

A financial corporation that specializes in financing installment purchases made by individuals and firms is called a consumer finance company. factoring company. credit union. sales finance company. commercial finance company.

What is a demand deposit?