Question 1

Why does a government lower interest rates to affect the value of the currency?

Accepted Answer

A)  To strengthen the value of the currency in the world market 
B)  To make goods cheaper and more attractive in the world market 
C)  To stimulate inflation 
D)  To increase the number of foreign imports, thereby increasing trade 
E)  To offset the price of must-have commodities, such as oil 
A)  To strengthen the value of the currency in the world market 
B)  To make goods cheaper and more attractive in the world market 
C)  To stimulate inflation 
D)  To increase the number of foreign imports, thereby increasing trade 
E)  To offset the price of must-have commodities, such as oil B

Question 2

Money deposited into a commercial bank has the potential of increasing the overall money supply.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following BEST describes the durability characteristic of money?

Accepted Answer

A)  Units of money do not expire after a certain time limit. 
B)  Units of money can be matched with the value of goods. 
C)  Units of money allow people to measure the relative value of goods and services. 
D)  Units of money of different nations are easily converted to other units of money. 
E)  Units of money have lasting value. 
A)  Units of money do not expire after a certain time limit. 
B)  Units of money can be matched with the value of goods. 
C)  Units of money allow people to measure the relative value of goods and services. 
D)  Units of money of different nations are easily converted to other units of money. 
E)  Units of money have lasting value. A

Question 4

An overly large decrease in the reserve requirement by the Federal Reserve System could result in inflation.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following BEST describes the stability characteristic of money?

Accepted Answer

A)  Units of money do not expire after a certain time limit. 
B)  Units of money of different nations are easily converted to other units of money. 
C)  Units of money can be matched with the value of goods. 
D)  Units of money allow people to measure the relative value of goods and services. 
E)  Units of money have relatively constant value. 
A)  Units of money do not expire after a certain time limit. 
B)  Units of money of different nations are easily converted to other units of money. 
C)  Units of money can be matched with the value of goods. 
D)  Units of money allow people to measure the relative value of goods and services. 
E)  Units of money have relatively constant value.

Question 6

According to reports,in addition to fraudulent information on loan applications,what can the subprime crisis of 2008 be traced to?

Accepted Answer

A)  Overly relaxed credit standards 
B)  Home foreclosures 
C)  Defaults on credit payments 
D)  High unemployment levels 
E)  Prime mortgage rates 
A)  Overly relaxed credit standards 
B)  Home foreclosures 
C)  Defaults on credit payments 
D)  High unemployment levels 
E)  Prime mortgage rates

Question 7

Which of the following actions can the Federal Deposit Insurance Company take in the event of a failure of one of its insured banks?

Accepted Answer

A)  The FDIC can seize the assets of the investors and settle the bank's debts. 
B)  The FDIC can allow the bank to stay afloat by granting a loan of federal money. 
C)  The FDIC can conduct an inquiry into the investors' assets and actions to determine if there was any malfeasance that caused the bank failure. 
D)  The FDIC can allow another bank to take responsibility for the failed bank's liabilities through sale of the failed bank. 
E)  The FDIC can settle the bank's debts through its insurance deposit fund and regulate the bank's transactions more strictly. 
A)  The FDIC can seize the assets of the investors and settle the bank's debts. 
B)  The FDIC can allow the bank to stay afloat by granting a loan of federal money. 
C)  The FDIC can conduct an inquiry into the investors' assets and actions to determine if there was any malfeasance that caused the bank failure. 
D)  The FDIC can allow another bank to take responsibility for the failed bank's liabilities through sale of the failed bank. 
E)  The FDIC can settle the bank's debts through its insurance deposit fund and regulate the bank's transactions more strictly.

Question 8

Money frees society from a system of barter.In doing so,money is performing which of the following functions?

Accepted Answer

A)  Store of value 
B)  Measure of worth 
C)  Unit of account 
D)  Determination factor 
E)  Medium of exchange 
A)  Store of value 
B)  Measure of worth 
C)  Unit of account 
D)  Determination factor 
E)  Medium of exchange

Question 9

In the United States,who has the greatest influence on the value of the U.S.dollar?

Accepted Answer

A)  The World Bank 
B)  The International Monetary Fund 
C)  The Federal Reserve 
D)  The European Central Bank 
E)  The United Nations (U.N.) 
A)  The World Bank 
B)  The International Monetary Fund 
C)  The Federal Reserve 
D)  The European Central Bank 
E)  The United Nations (U.N.)

Question 10

Which of the following terms refers to the interest level at which member banks can borrow money from the Federal Reserve System?

Accepted Answer

A)  Discount rate 
B)  Key rate 
C)  Prime rate 
D)  Federal insurance premium 
E)  Reserve requirement 
A)  Discount rate 
B)  Key rate 
C)  Prime rate 
D)  Federal insurance premium 
E)  Reserve requirement

Question 11

In which way does the World Bank differ from true international banks?

Accepted Answer

A)  The World Bank does not charge interest to governments with emerging markets. 
B)  The World Bank only provides funds for national improvements in order to increase international trade. 
C)  The World Bank is comprised and run by a group of 150 member nations. 
D)  The World Bank is designed to promote the stability of exchange rates among member nations. 
E)  The World Bank only lends money to those with negative trade balances. 
A)  The World Bank does not charge interest to governments with emerging markets. 
B)  The World Bank only provides funds for national improvements in order to increase international trade. 
C)  The World Bank is comprised and run by a group of 150 member nations. 
D)  The World Bank is designed to promote the stability of exchange rates among member nations. 
E)  The World Bank only lends money to those with negative trade balances.

Question 12

Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System?

Accepted Answer

A)  The Senate 
B)  The House of Representatives 
C)  The President of the United States 
D)  The Council of American Governors 
E)  The people of the United States 
A)  The Senate 
B)  The House of Representatives 
C)  The President of the United States 
D)  The Council of American Governors 
E)  The people of the United States

Question 13

Individual retirement accounts can be opened only by self-employed people such as doctors,small business owners,and consultants.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following BEST describes two of the three primary functions of the Federal Reserve System?

Accepted Answer

A)  Developing new financial markets and aiding banks in conducting their business 
B)  Aiding banks in conducting business and managing the U.S. money supply and interest rates 
C)  Managing the U.S. money supply and interest rates and monitoring interbank relationships 
D)  Monitoring interbank relationships and acting as a bank for the federal government 
E)  Acting as a bank for the federal government and developing new financial markets 
A)  Developing new financial markets and aiding banks in conducting their business 
B)  Aiding banks in conducting business and managing the U.S. money supply and interest rates 
C)  Managing the U.S. money supply and interest rates and monitoring interbank relationships 
D)  Monitoring interbank relationships and acting as a bank for the federal government 
E)  Acting as a bank for the federal government and developing new financial markets

Question 15

It has been discovered that the bank involved has been selling its riskiest mortgage accounts to the insurance company,which in turn has been selling these accounts packaged with other more stable loans at a sharply discounted price to other banks.Gavin asks his aides why this would be a beneficial relationship between the two institutions.What would his aides say?

Accepted Answer

By selling the risky loans out,the comme

Question 16

The divisibility characteristic of money is illustrated by a financial company's ability to divide its monetary assets among several investments.

Accepted Answer

A) True 
 B)False

Question 17

The increased activity of the financial market in the past five years has resulted in a severe drop in the required premiums for commercial banks to be members of the Federal Deposit Insurance Corporation.

Accepted Answer

A) True 
 B)False

Question 18

If a U.S.firm wishes to buy products from an overseas supplier,what would the firm use to guarantee payment on a specific future date?

Accepted Answer

A)  Currency exchange guarantee 
B)  Letter of credit 
C)  Brokerage service 
D)  Banker's acceptance 
E)  Security intermediary 
A)  Currency exchange guarantee 
B)  Letter of credit 
C)  Brokerage service 
D)  Banker's acceptance 
E)  Security intermediary

Question 19

Which of the following is the result of printing paper money while at the same time experiencing severe limitations in the supply of goods and services.

Accepted Answer

A)  Inflation 
B)  Interest rates 
C)  Investments 
D)  Quantitative easing 
E)  Hyperinflation 
A)  Inflation 
B)  Interest rates 
C)  Investments 
D)  Quantitative easing 
E)  Hyperinflation

Question 20

Which of the following indicates the relative strength of the currencies of two countries?

Accepted Answer

A)  Trade rate 
B)  Exchange rate 
C)  Trade balance 
D)  Relative gross national products 
E)  International loan rate 
A)  Trade rate 
B)  Exchange rate 
C)  Trade balance 
D)  Relative gross national products 
E)  International loan rate

Why does a government lower interest rates to affect the value of the currency?

Money deposited into a commercial bank has the potential of increasing the overall money supply.

Which of the following BEST describes the durability characteristic of money?

An overly large decrease in the reserve requirement by the Federal Reserve System could result in inflation.

Which of the following BEST describes the stability characteristic of money?

According to reports,in addition to fraudulent information on loan applications,what can the subprime crisis of 2008 be traced to?

Which of the following actions can the Federal Deposit Insurance Company take in the event of a failure of one of its insured banks?

Money frees society from a system of barter.In doing so,money is performing which of the following functions?

In the United States,who has the greatest influence on the value of the U.S.dollar?

Which of the following terms refers to the interest level at which member banks can borrow money from the Federal Reserve System?

In which way does the World Bank differ from true international banks?

Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System?

Individual retirement accounts can be opened only by self-employed people such as doctors,small business owners,and consultants.

Which of the following BEST describes two of the three primary functions of the Federal Reserve System?

The divisibility characteristic of money is illustrated by a financial company's ability to divide its monetary assets among several investments.

The increased activity of the financial market in the past five years has resulted in a severe drop in the required premiums for commercial banks to be members of the Federal Deposit Insurance Corporation.

If a U.S.firm wishes to buy products from an overseas supplier,what would the firm use to guarantee payment on a specific future date?

Which of the following is the result of printing paper money while at the same time experiencing severe limitations in the supply of goods and services.

Which of the following indicates the relative strength of the currencies of two countries?

The US Business Environment

Understanding Business Ethics and Social Responsibility

Entrepreneurship, New Ventures, and Business Ownership

Understanding the Global Context of Business

Managing the Business

Organizing the Business

Operations Management and Quality

Employee Behavior and Motivation

Leadership and Decision Making

Human Resource Management and Labor Relations

Marketing Processes and Consumer Behavior

Developing and Pricing Products

Distributing and Promoting Products

Information Technology Itfor Business

The Role of Accountants and Accounting Information

Managing Business Finances

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Exam 16: Understanding Money and the Role of Banking

Why does a government lower interest rates to affect the value of the currency?

Money deposited into a commercial bank has the potential of increasing the overall money supply.

Which of the following BEST describes the durability characteristic of money?

An overly large decrease in the reserve requirement by the Federal Reserve System could result in inflation.

Which of the following BEST describes the stability characteristic of money?

According to reports,in addition to fraudulent information on loan applications,what can the subprime crisis of 2008 be traced to?

Which of the following actions can the Federal Deposit Insurance Company take in the event of a failure of one of its insured banks?

Money frees society from a system of barter.In doing so,money is performing which of the following functions?

In the United States,who has the greatest influence on the value of the U.S.dollar?

Which of the following terms refers to the interest level at which member banks can borrow money from the Federal Reserve System?

In which way does the World Bank differ from true international banks?

Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System?

Individual retirement accounts can be opened only by self-employed people such as doctors,small business owners,and consultants.

Which of the following BEST describes two of the three primary functions of the Federal Reserve System?

The divisibility characteristic of money is illustrated by a financial company's ability to divide its monetary assets among several investments.

The increased activity of the financial market in the past five years has resulted in a severe drop in the required premiums for commercial banks to be members of the Federal Deposit Insurance Corporation.

If a U.S.firm wishes to buy products from an overseas supplier,what would the firm use to guarantee payment on a specific future date?

Which of the following is the result of printing paper money while at the same time experiencing severe limitations in the supply of goods and services.

Which of the following indicates the relative strength of the currencies of two countries?

The US Business Environment

Understanding Business Ethics and Social Responsibility

Entrepreneurship, New Ventures, and Business Ownership

Understanding the Global Context of Business

Managing the Business

Organizing the Business

Operations Management and Quality

Employee Behavior and Motivation

Leadership and Decision Making

Human Resource Management and Labor Relations

Marketing Processes and Consumer Behavior

Developing and Pricing Products

Distributing and Promoting Products

Information Technology Itfor Business

The Role of Accountants and Accounting Information

Managing Business Finances

Filters