Deck 18: Understanding Money Banking and Credit

Question 1

Which of the following encompasses anything used by a society to purchase products and services or resources?

A) money
B) capital
C) cash
D) funds

Answer 1

A

Question 2

Heshani just paid for her tuition with the money she earned in the summer. She know she will have expenses throughout the school year so she wants to set up a bank account where she can withdraw money any time she needs it. What type of account should she open?

A) term deposit
B) time deposit
C) open deposit
D) demand deposit

Answer 2

D

Question 3

Canada trades a shipment of wheat to Saudi Arabia in exchange for a shipment of oil. What is this type of arrangement called?

A) barter
B) a monetary exchange
C) an interchange
D) interstate commerce

Answer 3

A

Question 4

Tariq collected $300 last weekend for mowing yards. Rather than spending the money immediately, he set it aside in an interest-bearing account. He hopes to accumulate more than $3000 to offset his college expenses this fall. For Tariq, money is serving as which of the following?

A) a medium of exchange
B) a measure of value
C) a store of value
D) a bartering tool

Question 5

Because it is the common denominator that we use to compare products and decide which ones we will buy, money functions as which of the following?

A) accepted resource
B) measure of value
C) store of value
D) medium of exchange

Question 6

Peter has put the money he has earned over the summer to pay for college tuition in January at a Canadian bank. He cannot touch that money until January 1. Which type of deposit does Peter have?

A) time deposit
B) term deposit
C) demand deposit
D) fixed deposit

Question 7

It is easy to compare gas prices at different gas stations because the prices are always stated in dollars and cents per litre. Which function of money does this best illustrate?

A) store of value
B) medium of exchange
C) durability
D) measure of value

Question 8

Which of the following is NOT one of the three main components of Canada's money supply?

A) time deposits
B) demand deposits
C) currency
D) term deposits

Question 9

It is easy to compare the differences in price from one auto dealership to another when shopping for a new truck because of money's function as which of the following?

A) a measure of value
B) a medium of exchange
C) a measure of durability
D) a store of value

Question 10

You put $200 from every paycheque into your savings account. You hope that this money will earn interest over time and will help you to purchase a car at the end of the year. What function of money is illustrated in this example?

A) measure of value
B) unit of account
C) medium of exchange
D) store of value

Question 11

Avery needs to purchase a new computer for school. He looks at two laptops that have 18-inch screens, 16 GB of memory, and DVD/CD drives. One costs $850 and the other costs $700. Avery can use the prices of the laptops to determine which is a better deal. Which function of money does this illustrate?

A) unit of account
B) measure of value
C) medium of exchange
D) store of value

Question 12

In many stores in Canada, US currency is accepted for payment because the retailers know that their suppliers and other customers will also accept it. In this example, money serves as which of the following?

A) a medium of exchange
B) a unit of account
C) a store of value
D) a measure of value

Question 13

Jack buys something from the Internet using bitcoin. Which function of money does this illustrate?

A) unit of account
B) measure of value
C) medium of exchange
D) store of value

Question 14

Which of the following is an example of barter?

A) You pay the barista $7.50 for your grande mocha latte.
B) Your parents loan you $750 for this month's rent.
C) Your grandmother sends you a cheque for $50 for your birthday.
D) You and your best friend trade video games.

Question 15

What is the most common form of money in Canada?

A) gold
B) silver
C) currency
D) bartering

Question 16

The value of bitcoins on various exchanges fluctuates dramatically. This makes bitcoin look less like a currency and more like which of the following?

A) a scam
B) a risky way to pay
C) a speculative investment
D) a way for governments to catch criminals

Question 17

Every time you get paid, you deposit $50 in a savings account because you want to go to on trip to Florida. Which function of money does this best illustrate?

A) store of value
B) medium of exchange
C) measure of value
D) unit of account

Question 18

Tyler and his wife carefully budget funds each month and save 20% of their paycheques in a money market account so that they will have a down payment for a house within the next five years. Which function of money does this illustrate?

A) store of value
B) unit of account
C) measure of value
D) medium of exchange

Question 19

Which of the following is a system of exchange in which goods and services are traded directly for other goods and services?

A) barter
B) interchange
C) mercantile
D) commerce

Question 20

Peyton babysits the Fischer children for four hours. The Fischers pay her $30 in return for her service. Which function of money does this illustrate?

A) store of value
B) measure of value
C) medium of exchange
D) unit of account

Question 21

M1 and M2 are both measures of which of the following?

A) demand deposits
B) reserve requirement levels
C) the supply of money
D) inflation

Question 22

What is the term for the situation when prices spiral out of control and goods become more expensive for everyone?

A) inflation
B) hyperinflation
C) deflation
D) superinflation

Question 23

The two primary measures for the supply of money in the Canadian economy (M1 and M2) include all of the following EXCEPT which one?

A) money held in chequing accounts
B) money held in savings accounts
C) foreign currency deposited in Canadian banks
D) certain types of time-based deposit accounts

Question 24

Canadian residents' foreign currency deposits fall into which of the following categories?

A) M1
B) M2
C) M3
D) M4

Question 25

What kind of corporation is the Bank of Canada?

A) public
B) private
C) Crown
D) semi-private

Question 26

In which year was the Bank of Canada founded?

A) 1893
B) 1963
C) 1934
D) 1943

Question 27

Economic growth is steady and prices increase predictably over time when the money supply does which of the following?

A) is stagnant
B) is shrinking
C) grows too quickly
D) grows slow and steady

Question 28

The goals of monetary policy as controlled by the Bank of Canada are continued economic growth, full employment, and which of the following?

A) lower consumer goods prices
B) no inflation
C) low interest rates
D) stable prices

Question 29

The Bank of Canada has the power to do which of the following?

A) spend money
B) save money
C) create money
D) increase taxes to raise money

Question 30

Who controls the Bank of Canada?

A) no one; it is an independent institution
B) the prime minister
C) the house of commons
D) the government cabinet

Question 31

How much is Canada's overall money supply (M3)?

A) 1.2 trillion
B) 2.31 trillion
C) 3.17 trillion
D) 4.6 trillion

Question 32

Which of the following best describes credit cards?

A) They replace money.
B) They are a substitute for money.
C) They defer payment.
D) They count in the money supply.

Question 33

There is a decrease in prices due to oversupply of goods and services compared to the amount of money available to purchase them when the money supply does which of the following?

A) is shrinking
B) grows slow and steady
C) is stagnant
D) grows too quickly

Question 34

Deb is trying to sell her old car at the same time the Bank of Canada has increased the money supply. What effect will this have on Deb's car sale?

A) her car will sell more slowly
B) her car will sell more quickly
C) there will be no effect on the sale of her car
D) there will be deflation and she may have to lower her price

Question 35

Your friend Elizabeth says that all the Bank of Canada does is lower or raise interest rates. You explain that the Bank of Canada's actual mission is to do which of the following?

A) maintain an economically healthy and financially sound business environment
B) set the rules and regulations with which all banks are required to comply
C) prevent a recession at all costs
D) manipulate the market through the regulation of reserve requirements

Question 36

Money market mutual funds fall into which of the following categories?

A) M4
B) M3
C) M2
D) M1

Question 37

A rapid increase in the money supply can cause ______, which could lead to a rapid increase of prices due to __________ compared to the amount of goods and services.

A) inflation; an oversupply of money
B) deflation; an undersupply of money
C) deflation; an oversupply of money
D) inflation; an undersupply of money

Question 38

Lisa has a term deposit of $40,000 at a local bank. This $40,000 would be included in which of the following?

A) M1
B) M2
C) M3
D) M2 and M3

Question 39

What do many economists believe to be a healthy situation for the overall economy?

A) slow, steady inflation
B) moderate inflation
C) no inflation
D) a little deflation

Question 40

Which of the following can result from an oversupply of goods and services coupled with insufficient money to purchase them, potentially causing economic recession?

A) depression
B) inflation
C) hyperinflation
D) deflation

Question 41

Which type of institution is the Royal Bank of Canada, a for-profit organization that accepts deposits from all its customers, provides them with services, and makes loans?

A) investment banking firm
B) credit union
C) brokerage firm
D) chartered bank

Question 42

Which of the following methods does the Bank of Canada NOT use to control the money supply and the economy?

A) buys government securities and bonds
B) increases the reserve requirement
C) lends money to private businesses
D) sells government securities and bonds

Question 43

Which of the following actions by the Bank of Canada will increase the money supply and stimulate economic activity?

A) increasing the overnight rate
B) buying government securities in open market operations
C) selling government securities in open market operations
D) decreasing the prime rate

Question 44

Think of a time when the economy was very strong for several years and business was booming. During that time, however, prices began to increase and there was fear that the increase might continue for an extended period. Which of the following actions could the Bank of Canada have taken to counteract the increasing prices?

A) raise the overnight rate
B) lower the reserve requirement
C) buy government bonds
D) increase the overall supply of money

Question 45

The Bank of Canada uses which of the following to regulate the nation's supply of money in order to maintain a healthy economy?

A) fiscal policy
B) taxation
C) budgetary policy
D) monetary policy

Question 46

When the Bank of Canada_______ the discount rate, it typically _______ the economy.

A) increases; stimulates
B) decreases; stimulates
C) increases; has no effect on
D) decreases; has no effect on

Question 47

The Bank of Canada would like to stimulate the economy and increase the money supply. Which of the following would be most effective?

A) increase the prime rate
B) increase the overnight rate
C) sell government securities through open market operations
D) decrease the overnight rate

Question 48

What is the primary function of the Bank of Canada?

A) to charter national banks
B) to help the government influence the economy
C) to appoint its board members to run the bank independently
D) to regulate the supply of money in Canada to maintain a healthy economy

Question 49

The Bank of Canada promotes the economic and financial welfare of Canada by doing all of the following EXCEPT which one?

A) promoting the safety and efficiency of Canada's financial system
B) conducting monetary policy in a way that fosters confidence in the value of money
C) providing efficient and effective funds management services
D) assisting the current government in controlling the economy

Question 50

What is it called when the Bank of Canada buys or sells government securities in order to influence the money supply and overall economy?

A) open market operations
B) closed market operations
C) quantitative easing
D) economy manipulation

Question 51

What happens when the overnight rate is increased?

A) there is more money for banks to lend
B) there is an increase in the overall money supply
C) there is increased economic activity
D) there is less money for banks to lend

Question 52

Which of the following provides basic deposit insurance to depositors if their bank fails?

A) Canadian Reserve System
B) Canadian Deposit Insurance Corporation
C) Canada Revenue Agency
D) Federal Savings and Loan Insurance Corporation

Question 53

Which type of institution accepts deposits from, and lends money to, only those people who are its members?

A) chartered bank
B) insurance company
C) credit union
D) brokerage firm

Question 54

Which of the following is the central bank of Canada?

A) Canada Revenue Agency
B) Bank of Canada
C) Central Banking Institute of Canada
D) National Bank of Canada

Question 55

Which of the following is the interest rate at which the major financial institutions borrow from each other?

A) open market rate
B) prime rate
C) secured rate
D) overnight rate

Question 56

Which type of financial services institution does not accept deposits from customers, but may be able to provide financing for individuals and businesses that may not be able to get financing elsewhere?

A) credit union
B) insurance company
C) chartered bank
D) finance company

Question 57

Which of the following actions by the Bank of Canada will decrease the money supply?

A) buying government securities through open market operations
B) increasing the prime rate
C) decreasing the overnight rate
D) increasing the overnight rate

Question 58

If the Bank of Canada buys government securities in open market operations, what is the likely effect?

A) an increase in the overall money supply and increased economic activity
B) less money for banks to lend customers leading to an economic slowdown
C) a decrease in the overall money supply and higher prices on goods and services
D) a rapid increase in the amount of loans consumers take leading to increased economic activity

Question 59

What is the overnight rate?

A) the lowest rate of interest at which money may be borrowed commercially
B) the interest rate charged when major financial institutions borrow from each other
C) the interest rate at which banks lend reserve balances to other banks
D) the interest rate offered by commercial banks to its most creditworthy customers

Question 60

Which of the following is a tool used by the Bank of Canada in managing the money supply in Canada?

A) open market operations
B) closed market operations
C) raising bank taxes
D) importing foreign currency

Question 61

Federally registered banks are regulated by which of the following?

A) Canada Revenue Agency
B) Office of the Superintendent of Financial Institutions
C) Finance Department of Canada
D) Federal Commissioner of Banks

Question 62

Imagine you have worked every summer for the last four years in order to save money to buy a car. You have $23,000 deposited in a savings account at Scotiabank. One day, you turn on the news and discover that the stock market is crashing and people are rushing to banks to withdraw all of their money. What should you do?

A) panic: rush to your bank to withdraw your $23,000
B) do not panic: even though your bank is not CDIC insured, you know you will get your money
C) do not panic: your bank is CDIC insured and you will receive a cheque for $23,000 if your bank fails
D) panic: even though your bank is CDIC insured you are guaranteed only $10,000 and will not be able to buy a car

Question 63

Georgina has $200,000 in a savings account in her name alone and another $150,000 in an investment account held jointly with her daughter. If the bank fails, how much of her deposits are protected by the CDIC?

A) $200,000
B) $100,000
C) $250,000
D) $150,000

Question 64

Tameka owns a small business and has two accounts at the local bank, which is CDIC insured. Her personal savings account has $125,000, and an account for her investments has $285,000. If the local bank fails, how much will Tameka receive from the FDIC?

A) $125,000
B) $410,000
C) $100,000
D) $285,000

Question 65

Meridian offers chequing and deposit and loan products to its members. Meridian is which type of financial institution?

A) chartered bank
B) credit union
C) non-bank financial institution
D) mutual funds bank

Question 66

Which of the following financial institutions would be considered a non-bank financial institution?

A) credit union
B) mutual fund company
C) national chartered bank
D) finance company

Question 67

You are living off campus in an apartment near school. It is the first of the month and your rent is due. You won't have enough money in your account to cover until your employer deposits your paycheque. You don't want to overdraw your account, so you check your balance several times before sending your rent to the landlord. This example illustrates which innovation in banking?

A) theft protection
B) convenient deposit options
C) increased access to funds
D) real-time monitoring of funds

Question 68

Kyle uses a local financial institution for his banking needs such as a chequing and savings account. When he asks the manager what the money he has deposited is used for, the manager explains that the institution deals primarily with consumer loans and home mortgage loans. Anyone can open an account at this institution. What type of financial institution is Kyle using?

A) commercial mutual bank
B) mutual funds bank
C) credit union
D) chartered bank

Question 69

Suzanne is considered a member of her financial institution, which provides chequing, savings, and other financial services. She is eligible for membership because she is a teacher. What type of financial institution is Suzanne using?

A) national bank
B) mutual savings bank
C) chartered bank
D) credit union

Question 70

You are so thankful that your employer offers direct deposit for your paycheques. Every other Friday, your paycheque is deposited into your account, and it saves you from having to make a trip to the bank. This is an example of which innovation in banking?

A) real-time monitoring of funds
B) increased access to funds
C) mobile-app banking
D) convenient deposit options

Question 71

Lana's business has two accounts at a bank: $150,000 in an investment account and $300,000 in a savings account. If the bank fails, how much of the business's deposits are protected by the CDIC?

A) $150,000
B) $300,000
C) $100,000
D) $450,000

Question 72

Which of the following is protected by Canadian Deposit Insurance Corporation?

A) mutual funds
B) bonds
C) bank deposits
D) common shares

Question 73

It is Saturday night at 11:00 p.m., and you and your friends are going to see a midnight showing of the latest action-hero movie. You log on to your bank's website on your laptop to check your balance to make sure you have enough money in your account to buy a movie ticket. This example illustrates which innovation in banking?

A) overdraft protection
B) increased access to funds
C) convenient deposit options
D) real-time monitoring of funds

Question 74

You receive a birthday cheque from your grandmother in the mail. It is raining and you really do not feel like leaving your dorm to go to the bank to deposit your cheque. You remember that your bank allows you to take a picture of the front and back of a cheque in order to deposit it into your account-all from your mobile phone. This example illustrates which innovation in banking?

A) overdraft protection
B) convenient deposit options
C) increased access to funds
D) real-time monitoring of funds

Question 75

The CDIC provides basic deposit insurance of what amount per depositor?

A) $200,000
B) $250,000
C) $150,000
D) $100,000

Question 76

Why does Laura keep only $100,000 combined in her savings and chequing accounts at TD Bank?

A) any more will not earn additional interest
B) her bank prohibits her from depositing more
C) her fees will be significantly higher if more money is deposited
D) this is the maximum amount insured per depositor

Question 77

Canaccord Genuity is a brokerage and banking company that operates in four main divisions: trading, wealth management, investing, and banking. Canaccord Genuity can be categorized as which of the following?

A) commercial bank
B) credit union
C) non-bank financial institution
D) mutual funds bank

Question 78

Jeff and Nathan are going to a concert and Jeff forgot his wallet back at home. Nathan has extra cash and lends Jeff $100. Jeff has his phone with him and Interac e-transfers the $100 to Nathan. This example illustrates which innovation in banking?

A) theft protection
B) convenient deposit options
C) increased access to funds
D) real-time monitoring of funds

Question 79

The responsibility for insuring deposits against bank failures is held by which of the following?

A) Canadian Banking Reserve System
B) Canada Deposit Insurance Corporation
C) Bank Insurance Corporation
D) Canadian Finance Department

Question 80

You turn on the news to discover that CIBC has failed. Your parents have their life savings of $220,000 in an account at CIBC. Just then, the phone rings. Your mom is in a panic. What should you tell her?

A) to get to the bank right away to see if she can get some, if not all, of their money withdrawn
B) because the bank is CDIC insured, she and your dad will be able to recover $100,000 of their savings
C) not to worry: even though CIBC is not CDIC insured, the bank is required to give them their money
D) because the bank is CDIC insured, she and your dad will receive a cheque for the total amount of their savings