Deck 14: Money and Banking

Question 1

When does the value of money increase?

A)When money serves as a store of value
B)When the supply of money is stable
C)When money is durable
D)When the money supply is low
E)When the money supply increases

Answer 1

D

Question 2

Which of the following is a form of money?

A)Japanese yen
B)Bonds
C)A gold medallion
D)IBM common stock
E)A credit card

Answer 2

A

Question 3

Depending on the time of the year,meat may be in short supply thus violating the money criterion of being

A)durable.
B)stable.
C)portable.
D)valuable.
E)divisible.

Answer 3

B

Question 4

Because meat spoils,it fails to meet the money criterion of being

A)valuable.
B)divisible.
C)stable.
D)durable.
E)portable.

Question 5

An order instructing the bank to pay a given sum to a specified person or firm is

A)a time deposit.
B)currency.
C)a bank rate.
D)a term deposit.
E)a cheque.

Question 6

Which of the following is a consequence of the divisibility characteristic of money?

A)Units of money do not expire after a certain time limit.
B)Units of money can be accurately matched with the value of goods.
C)Units of money are easily carried.
D)Units of money have relatively stable value.
E)Units of money of different nations are easily converted to other units of money.

Question 7

If today's currency wears out it can be replaced,thus demonstrating that it is

A)portable.
B)divisible.
C)durable.
D)stable.
E)valuable.

Question 8

Since a cow is large,bulky,and hard to handle,it fails to meet the money criterion of being

A)stable.
B)portable.
C)divisible.
D)durable.
E)valuable.

Question 9

The expression "$1000 worth of clothes" represents

A)a unit of account.
B)a store of value.
C)a medium of exchange.
D)the stability of money.
E)the durability of money.

Question 10

Which of the following influences the value of money?

A)The supply of money
B)Barter
C)Durability
D)Divisibility
E)Portability

Question 11

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

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

Question 12

Because the Canadian dollar varies only slightly in its ability to purchase goods it is considered

A)divisible.
B)stable.
C)valuable.
D)portable.
E)durable.

Question 13

What caused the decline of barter as a means of obtaining something needed by a consumer?

A)Development of the central bank system
B)The discovery of gold
C)The invention of the credit card
D)The use of bonds
E)The introduction of money

Question 14

Which of the following best describes the portability characteristic of money?

A)It neither dies nor spoils,and if it wears out,it can be replaced.
B)Units of money can be matched with the value of goods.
C)It can be exchanged across national borders.
D)It allows people to measure the relative value of goods and services.
E)It is light and easy to handle.

Question 15

The characteristics of money are

A)divisible,interchangeable,portable,and exchangeable.
B)durable,paper,coin,and stable.
C)interchangeable,divisible,paper,and banks.
D)durable,divisible,stable,and portable.
E)portable,divisible,durable,and interchangeable.

Question 16

All of the following are criteria for something to be considered as money except

A)divisibility.
B)stability.
C)durability.
D)portability.
E)value.

Question 17

A dollar can be exchanged for four quarters thus demonstrating that it is

A)durable.
B)stable.
C)divisible.
D)portable.
E)valuable.

Question 18

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

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.

Question 19

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

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 20

Money is

A)important in a market economy,but not in a command economy.
B)tokens that represent a countries resources that are accepted in every place of the world.
C)any object generally accepted by people as payment for goods and services.
D)that with which an individuals' efforts must be rewarded.
E)wealth.

Question 21

Which of the following is not part of the M-1 money supply?

A)Credit cards
B)Currency
C)Demand deposits
D)Cheques
E)All of these are part of M-1.

Question 22

Which of the following is not part of the M-1 supply?

A)Currency at hand
B)Currency amount of written cheques
C)Currency available through a debit card
D)Currency in chequing accounts
E)Currency value of time deposits

Question 23

Money lets you measure the relative values of goods and services.In so doing,money is performing which of the following functions?

A)Store of value
B)Medium of exchange
C)Determination factor
D)Monetary flagging
E)Unit of account

Question 24

The M-2 measurement of the money supply includes everything in M-1 plus

A)time deposits.
B)money market mutual funds.
C)time deposits,money market mutual funds,and savings deposits.
D)corporate bonds,corporate stocks,and commercial paper.
E)corporate stocks,money market mutual funds,and corporate bonds.

Question 25

As of April 2018,the value of M-1 was

A)$38.5 million.
B)$987 million.
C)$877 billion.
D)$975.2 billion.
E)$1.6 trillion.

Question 26

Stephen got his paycheque on Friday.After a good time at the ballgame on Saturday,he purchased some groceries,bought a new pair of pants and made his car payment.This illustrates the ________ function of money.

A)store of value
B)basis for banking system
C)medium of exchange
D)payment for labour
E)unit of account

Question 27

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?

A)As a unit of account
B)As a store of value
C)As a source of currency
D)As a medium of exchange
E)As a standard of value

Question 28

Which of the following is contained in the M-1 measurement of the money supply?

A)The number of new automobiles produced in the nation in the previous month
B)The number of new homes started in the month
C)Time deposits
D)Credit card balances
E)Cash and the money in chequing accounts

Question 29

Ken and Tina have decided to put $10 in a jar every week until they have saved enough to buy a new dining room set.How are they primarily using this money?

A)As a unit of account
B)As a store of value
C)As a source of currency
D)As a standard of value
E)As a medium of exchange

Question 30

________ are operated by investment companies that bring together pools of assets from many investors and purchases a collection of short-term,low-risk financial securities.

A)All mutual funds
B)Global development funds
C)Money market mutual funds
D)Schedule B banks
E)Pension funds

Question 31

Which of the following is not included in either M-1 or M-2?

A)Certificates of Deposit
B)Time deposits
C)Savings accounts
D)Credit cards
E)Chequing accounts

Question 32

Which of the following accounts for nearly all the nation's money supply?

A)M-1
B)Currency
C)Demand deposits
D)Currency plus demand deposits
E)M-2

Question 33

Which of the following is contained in the M-1 measurement of the money supply?

A)The number of new automobiles produced in the nation
B)Currency and demand deposits
C)Credit card cash advances
D)The number of new homes started in the month
E)Time deposits

Question 34

Which of the following is not part of the M-2 money supply?

A)Debit card account
B)Time deposits
C)Money market mutual funds
D)Savings account
E)Credit card account

Question 35

All of the following are true about credit cards except

A)credit cards are a store of value.
B)credit cards are quite convenient.
C)2 to 5 percent of total credit-sales dollars goes to card issuers.
D)credit cards serve as a temporary medium of exchange.
E)credit cards are extremely profitable for the companies that issue them.

Question 36

Scott saw Laura's paycheque and discovered that she makes $200 a month more than he does.He concludes that her job must be more important than his.This illustrates the ________ function of money.

A)store of value
B)medium of exchange
C)payment for labour
D)unit of account
E)basis for banking system

Question 37

As of April 2018,the value of M-2 was

A)$345 million.
B)$443.5 million.
C)$1596 billion.
D)$212.4 billion.
E)$967.5 billion.

Question 38

Money,in the form of currency,can be used for future purchases and thus illustrates the ________ function of money.

A)basis for banking system
B)store of value
C)medium of exchange
D)payment for labour
E)unit of account

Question 39

Joe is a research economist for the Royal Bank.His most reliable measure of money would be

A)currency plus demand deposits.
B)M-2.
C)demand deposits.
D)M-1.
E)currency.

Question 40

Which of the following is considered part of the M-1 money supply?

A)Stocks in a major auto company
B)Bonds
C)Certificates of deposit
D)Term deposits
E)These options are not part of the M-1 money supply.

Question 41

Which of the following is not one of the "four financial pillars"?

A)Investment dealers
B)Life insurance companies
C)Credit card companies
D)Trust companies
E)Chartered banks

Question 42

The principal source of short-term loans for business firms is

A)contractual savings institutions.
B)trust companies.
C)chartered banks.
D)investment companies.
E)loans from relatives of the owners.

Question 43

Which of the following changes have occurred in banking because of deregulation?

A)Large business firms have increased their reliance on bank loans.
B)Banks can now make whatever profits they can manage.
C)Banks are providing a narrower and more highly focused array of financial products to their customers than they did before deregulation.
D)Banks have increased the training given to employees.
E)Bank profits are now being sent to foreign financial companies.

Question 44

In February 2018,Canadian chartered banks had assets totalling

A)$112 billion.
B)$298 billion.
C)$563 billion.
D)$2.39 trillion.
E)$4.65 trillion.

Question 45

Experts are increasingly sounding a warning about mounting credit card debt.Given that,which of the following would be an unwise strategy for a credit card company?

A)Making sure the company's credit card rules are clear and easy-to-understand
B)Charging the same interest rate as other credit card companies
C)Ensuring that fees for exceeding credit limits are no higher than necessary
D)Increasing the value of the promotional items that are used to attract new credit card customers
E)Offering free debt counselling to credit card customers

Question 46

Which of the following statements about chartered banks is false?

A)A chartered bank is privately owned.
B)A chartered bank is profit-seeking.
C)Chartered banks are the main source of short-term loans for businesses.
D)A chartered bank is required to use funds obtained from savers to purchase portfolios of government bonds.
E)A chartered bank serves individuals,non-business organizations,and businesses as a financial intermediary.

Question 47

Joanne has money in a ________;this requires notice prior to making a withdrawal and cannot be transferred to others by a written cheque.

A)demand deposit
B)money market fund
C)jar
D)certified cheque
E)time deposit

Question 48

The interest rate available to a bank's most creditworthy customers is the

A)discount rate.
B)optimal rate.
C)key rate.
D)funds rate.
E)prime rate.

Question 49

Which of the following is correct regarding credit cards?

A)They are a store of value.
B)They are not a money substitute.
C)They are a permanent medium of exchange.
D)They are becoming more important but are still not a major factor in the purchase of consumer goods.
E)They are often referred to as "plastic money."

Question 50

The largest bank in Canada (in terms of sales revenue)is

A)Canadian Imperial Bank of Commerce.
B)Bank of Montreal.
C)Toronto-Dominion Bank.
D)Royal Bank of Canada.
E)National Bank.

Question 51

Canadian Heritage,an investment company that groups together pools of assets,showed an average return of 3.75% for the last three months.Canadian Heritage set up ________ for its investors.

A)time deposits
B)money market mutual funds
C)demand deposits
D)hedge funds
E)term deposits

Question 52

________ are operated by investment companies that bring together pools of assets from many investors.

A)Term deposits
B)Demand deposits
C)Time deposits
D)Money market mutual funds
E)Savings deposits

Question 53

Deregulation of banks has caused banks to

A)decrease the amount of funds they lend to small business.
B)abandon plans for expansion into foreign markets.
C)stop issuing commercial paper.
D)increase their level of foreign ownership.
E)diversify to provide a wider array of financial products to their clients.

Question 54

The prime rate of interest is the rate charged

A)on time deposits.
B)on consumer installment loans.
C)to successful businesses.
D)on all mortgages and occasionally on car loans.
E)to the riskiest borrowers.

Question 55

Canada has a ________ banking system.

A)multi-sectoral
B)governmental
C)unitary
D)bilingual
E)branch

Question 56

The main function of financial institutions is to

A)offer trust services.
B)create money.
C)provide loans to small businesses.
D)offer chequing and savings accounts.
E)facilitate the flow of money from sectors with surpluses to those with deficits.

Question 57

You are applying for a bank loan and the loan officer wants to know about your personal wealth.She is inquiring about

A)the money you have in your wallet.
B)the money in your chequing and savings account.
C)the money you have invested.
D)the amount of equity you have in your home.
E)all of these.

Question 58

A ________ is a privately owned,profit-seeking firm that serves individuals,non-business organizations,and businesses as a financial intermediary.

A)pension fund
B)credit union
C)chartered bank
D)trustee
E)trust company

Question 59

Canadians hold a total of ________ credit cards.

A)5 million
B)20.6 million
C)43.1 million
D)74.3 million
E)190.8 million

Question 60

When buying from a supplier in France,an Ontario-based company has arranged for its bank to pay the supplier the cost of the desired material when it has passed customs in Canada.Which of the following terms is this type of bank promise called?

A)Banker's acceptance
B)Bank trust service
C)Certified cheque
D)Letter of credit
E)Currency exchange agreement

Question 61

A card that allows an individual to transfer money between bank accounts is a(n)

A)smart card.
B)e-card.
C)NetCash.
D)e-cash.
E)debit card.

Question 62

Which of the following might the Bank of Canada do to increase the money supply?

A)Sell government securities
B)Increase the bank rate
C)Impose a new tax
D)Buy government securities
E)Increase the reserve rate

Question 63

Which of the following is correct with regard to Canadian banks?

A)They are not allowed to provide financing to small businesses because those businesses are too risky.
B)They are not allowed to sell shares of stock to the general public.
C)They are allowed to provide insurance services,but not in their bank branches.
D)They are protected from competition from foreign controlled banks.
E)All of these are correct.

Question 64

When the Bank of Canada wants to slow down business activity and decrease the money supply,it

A)lowers the bank rate.
B)lowers the reserve requirement.
C)decreases government spending.
D)buys government securities.
E)raises the bank rate.

Question 65

After using her ________ card to make a purchase,Janet checks an electronic display to determine how much money is left on the card.

A)debit
B)smart
C)direct purchase
D)direct deposit
E)credit

Question 66

There are about ________ debit card transactions each year on the Interac network.

A)5)7 billion
B)100 million
C)500 million
D)1)6 billion
E)17.3 billion

Question 67

When credit and debit card information is embedded in smartphones,you have

A)a mobile digital wallet.
B)a system which is designed to allow hackers to steal your money.
C)a smart card.
D)a point-of-sale transfer system.
E)a debit card.

Question 68

When the Bank of Canada wants to stimulate business activity and increase the money supply,it

A)buys government securities.
B)raises the reserve requirement.
C)decreases government spending.
D)raises the bank rate.
E)sells government securities.

Question 69

A(n)________ is a bank's promise to pay a specified amount of money at a future date.

A)bankers' acceptance
B)electronic funds transfer
C)promissory note
D)bank loan
E)letter of credit

Question 70

When a bank makes your monthly bill payments and manages your investment portfolio,this is known as

A)a trust service.
B)a smart card.
C)an ABM.
D)a direct deposit.
E)a point-of-sale transfer.

Question 71

Which of the following is most likely to get an unsecured loan?

A)A retail florist shop with collateral
B)A wholesale grocer with a marginal credit history
C)A lawyer with collateral
D)A large manufacturing firm with an excellent credit rating
E)A farmer

Question 72

Which of the following will result in an decrease of the money supply?

A)An increase in taxes
B)Purchase of securities by the Bank of Canada
C)A decrease in the bank rate
D)An increase in the discount rate
E)A decrease in reserve requirements

Question 73

If the reserve requirement was 10 percent,a $100 deposit could result in a ________ increase in new deposits for all banks in the system.

A)$200
B)$500
C)$1000
D)$10 000
E)$100 000

Question 74

Which of the following reasons is the primary motivator for a bank to try to acquire new depositors?

A)A new deposit account will make more funds available to pay the interest on other deposit accounts.
B)A new deposit account will make more funds available to pay the bank's employees.
C)A new deposit account will make more funds available to give out in loans.
D)A new deposit account will make more funds available to give out in dividends to its investors.
E)A new deposit account will make more funds available to facilitate brokerage transactions.

Question 75

Which of the following statements best describes why a decrease in reserve requirements often results in an increase in the money supply?

A)A decrease in reserve requirements gives banks more money to better determine their interest rates.
B)A decrease in reserve requirements gives banks more money to pay off their debts.
C)A decrease in reserve requirements gives banks more money to lend out.
D)A decrease in reserve requirements gives banks more money to offer in dividend payments to their clients.
E)A decrease in reserve requirements gives banks more money to reward their employees for meritorious financial ventures.

Question 76

The main purpose of the Bank of Canada is to

A)set prime interest rates.
B)assist in the merger of troubled banks with healthier institutions.
C)bail out banks like the Northland and CCB.
D)deregulate the banking industry.
E)control the nation's money supply.

Question 77

Jack is one of the bank's most creditworthy customers.The interest rate available to Jack is the

A)reserve requirement rate.
B)overnight rate.
C)prime rate.
D)discount rate.
E)rediscount rate.

Question 78

What is a debit card?

A)The same thing as a demand deposit
B)Money that moves along multiple channels of consumers and businesses via digital electronic transmissions
C)A type of plastic money that immediately reduces the balance in the user's bank account when it is used
D)An electronic purse that can be programmed with electronic money at ATM machines
E)The same thing as a time deposit

Question 79

Which of the following statements best explains how financial institutions create money?

A)By opening new chequing accounts and giving more people access to readily available cash,financial institutions expand the money supply.
B)By issuing money through government contracts,financial institutions expand the money supply.
C)By taking deposits and loaning out these funds,financial institutions expand the money supply.
D)By collecting interest on its accounts through investments,financial institutions expand the money supply.
E)By giving interest from its accounts to its clients,financial institutions expand the money supply.

Question 80

The interest rate at which chartered banks can borrow from the Bank of Canada is the

A)preferred rate.
B)prime rate.
C)prime plus 1 percent.
D)bond rate.
E)bank rate.