Deck 14: Money and Banking

Question 1

Different parts of a cow are worth different amounts, thus violating the money characteristic of being
durable.
stable.
divisible.
valuable.
portable.

Answer 1

divisible.

Question 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.

Answer 2

durable, divisible, stable, and portable.

Question 3

Which of the following influences the value of money?
The supply of money
Barter
Durability
Divisibility
Portability

Answer 3

The supply of money

Question 4

When does the value of money increase?
When money serves as a store of value
When the supply of money is stable
When money is durable
When the money supply is low
When the money supply increases

Question 5

Which of the following is contained in the M-1 measurement of the money supply?
The number of new automobiles produced in the nation
Currency and demand deposits
Credit card cash advances
The number of new homes started in the month
Time deposits

Question 6

Since a cow is large, bulky, and hard to handle, it fails to meet the money criterion of being
stable.
portable.
divisible.
durable.
valuable.

Question 7

Because meat spoils, it fails to meet the money criterion of being
valuable.
divisible.
stable.
durable.
portable.

Question 8

What caused the decline of barter as a means of obtaining something needed by a consumer?
Development of the central bank system
The discovery of gold
The invention of the credit card
The use of bonds
The introduction of money

Question 9

If today's currency wears out it can be replaced, thus demonstrating that it is
portable.
divisible.
durable.
stable.
valuable.

Question 10

Stephen got his paycheque on Friday. After a good time at the ballgame on Saturday, he purchased some groceries, rented a video, and made his car payment. This illustrates the ________ function of money.
store of value
basis for banking system
medium of exchange
payment for labour
unit of account

Question 11

Which of the following is a form of money?
Japanese yen
Bonds
A gold medallion
IBM common stock
A Visa credit card

Question 12

An order instructing the bank to pay a given sum to a specified person or firm is
a time deposit.
currency.
a bank rate.
a term deposit.
a cheque.

Question 13

Depending on the time of the year, meat may be in short supply thus violating the money criterion of being
durable.
stable.
portable.
valuable.
divisible.

Question 14

The expression "$1000 worth of clothes" represents
a unit of account.
a store of value.
a medium of exchange.
the stability of money.
the durability of money.

Question 15

Because the Canadian dollar varies only slightly in its ability to purchase goods it is considered
divisible.
stable.
valuable.
portable.
durable.

Question 16

A dollar can be exchanged for four quarters thus demonstrating that it is
durable.
stable.
divisible.
portable.
valuable.

Question 17

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

Question 18

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?
As a unit of account
As a store of value
As a source of currency
As a standard of value
As a medium of exchange

Question 19

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

Question 20

All of the following are criteria for something to be considered as money except
divisibility.
stability.
durability.
portability.
value.

Question 21

________ are operated by investment companies that bring together pools of assets from many investors.
Term deposits
Demand deposits
Time deposits
Money market mutual funds
Savings deposits

Question 22

Money held by a financial institution which requires notice prior to making a withdrawal and cannot be transferred to others by a written cheque is known as
money market funds and accounts.
time deposits.
currency.
certified holdings.
demand deposits.

Question 23

All of the following are true about credit cards except
credit cards are a store of value.
credit cards are quite convenient.
2 to 5 percent of total credit-sales dollars goes to card issuers.
credit cards serve as a temporary medium of exchange.
credit cards are extremely profitable for the companies that issue them.

Question 24

Joe is a research economist for the Royal Bank. His most reliable measure of money would be
currency plus demand deposits.
M-2.
demand deposits.
M-1.
currency.

Question 25

In Canada, the value of goods bought with credit cards each year is about
$180 million.
$980 million.
$30 billion.
$150 billion.
$1.2 trillion.

Question 26

Which of the following is considered part of the M-1 money supply?
Stocks in a major auto company
Bonds
Certificates of deposit
Term deposits
None of these are part of the M-1 money supply.

Question 27

The M-2 measurement of the money supply includes everything in M-1 plus
time deposits.
money market mutual funds.
time deposits, money market mutual funds, and savings deposits.
corporate bonds, corporate stocks, and commercial paper.
corporate stocks, money market mutual funds, and corporate bonds.

Question 28

Money, in the form of currency, can be used for future purchases and thus illustrates the ________ function of money.
basis for banking system
store of value
medium of exchange
payment for labour
unit of account

Question 29

________ 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.
All mutual funds
Global development funds
Money market mutual funds
Schedule B banks
Pension funds

Question 30

Which of the following is not included in either M-1 or M-2?
CDs
Time deposits
Savings accounts
Credit cards
Chequing accounts

Question 31

Which of the following is contained in the M-1 measurement of the money supply?
The number of new automobiles produced in the nation in the previous month
The number of new homes started in the month
Time deposits
Credit card balances
Cash and the money in chequing accounts

Question 32

If Sally says she has purchased $250.00 worth of groceries, she is referring to money as
a unit of account.
a method of divisibility.
a medium of exchange.
a store of value.
a measure of stability.

Question 33

Which of the following is not part of the M-1 money supply?
Credit cards
Currency
Demand deposits
Cheques
All of these are part of M-1.

Question 34

You are applying for a bank loan and the loan officer wants to know about your personal wealth. She is inquiring about
the money you have in your wallet.
the money in your chequing and savings account.
the money you have invested.
the amount of equity you have in your home.
all of these.

Question 35

Money lets you measure the relative values of goods and services. In so doing, money is performing which of the following functions?
Store of value
Medium of exchange
Determination factor
Monetary flagging
Unit of account

Question 36

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

Question 37

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

Question 38

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.
store of value
medium of exchange
payment for labour
unit of account
basis for banking system

Question 39

All products can be valued and measured in terms of dollars. This illustrates the ________ function of money.
payment for labour
unit of account
store of value
basis for banking system
medium of exchange

Question 40

Joanne has money in a ___________; this requires notice prior to making a withdrawal and cannot be transferred to others by a written cheque.
demand deposit
money market fund
jar
certified cheque
time deposit

Question 41

What term identifies a bank's promise to pay a foreign business firm (e.g., German firm) a certain amount if the specified conditions are met?
Bank loan
Letter of credit
Promissory note
Deposit
Electronic funds transfer

Question 42

The principal source of short-term loans for business firms is
contractual savings institutions.
trust companies.
chartered banks.
investment companies.
loans from relatives of the owners.

Question 43

Canada has a ________ banking system.
multi-sectoral
governmental
unitary
bilingual
branch

Question 44

The prime rate of interest is the rate charged
on time deposits.
on consumer installment loans.
to major business customers.
on mortgages.
to the most risky borrowers.

Question 45

Terri will be going to Ireland next week. She would be wise to arrange for a(n) ________ prior to leaving so that she can withdraw cash and transfer money between bank accounts on her trip.
e-card
smart card
debit card
NetCash
e-cash

Question 46

Deregulation of banks has caused banks to
decrease the amount of funds they lend to small business.
abandon plans for expansion into foreign markets.
stop issuing commercial paper.
increase their level of foreign ownership.
diversify to provide a wider array of financial products to their clients.

Question 47

The main function of financial institutions is to
offer trust services.
create money.
provide loans to small businesses.
offer chequing and savings accounts.
facilitate the flow of money from sectors with surpluses to those with deficits.

Question 48

The interest rate available to a bank's most creditworthy customers is the
discount rate.
optimal rate.
key rate.
funds rate.
prime rate.

Question 49

Which of the following is correct regarding credit cards?
They are a store of value.
They are not a money substitute.
They are a permanent medium of exchange.
They are becoming more important but are still not a major factor in the purchase of consumer goods.
They are often referred to as "plastic money."

Question 50

When credit and debit card information is embedded in smartphones, you have
a mobile digital wallet.
a system which is designed to allow hackers to steal your money.
a smart card.
a point-of-sale transfer system.
a debit card

Question 51

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

Question 52

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

Question 53

A card that allows an individual to transfer money between bank accounts is a(n)
smart card.
E-card.
NetCash.
E-cash.
debit card.

Question 54

There are about ________ debit card transactions each year on the Interac network.
3 million
100 million
500 million
2 billion
4 billion

Question 55

Which of the following changes have occurred in banking because of deregulation?
Large business firms have increased their reliance on bank loans.
Banks can now make whatever profits they can manage.
Banks are providing a narrower and more highly focused array of financial products to their customers than they did before deregulation.
Banks have increased the training given to employees.
Bank profits are now being sent to foreign financial companies.

Question 56

Which of the following is not one of the "four financial pillars"?
Investment dealers
Life insurance companies
Credit card companies
Trust companies
Chartered banks

Question 57

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.

Question 58

When a bank makes your monthly bill payments and manages your investment portfolio, this is known as
a trust service.
a smart card.
an ABM.
a direct deposit.
a point-of-sale transfer.

Question 59

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

Question 60

The largest bank in Canada (in terms of sales revenue) is
Canadian Imperial Bank of Commerce
Bank of Montreal
Toronto-Dominion Bank
Royal Bank of Canada
National Bank

Question 61

When the Bank of Canada wants to stimulate business activity and increase the money supply, it
buys government securities.
raises the reserve requirement.
decreases government spending.
raises the bank rate.
sells government securities.

Question 62

Which of the following is correct with regard to Canadian banks?
They are not allowed to provide financing to small businesses because those businesses are too risky.
They are not allowed to sell shares of stock to the general public.
They are allowed to provide insurance services, but not in their bank branches.
They are protected from competition from foreign controlled banks.
All of these are correct.

Question 63

Cynthia is concerned about electronic money because
power failures cause information to be lost.
hackers may break into e-cash systems and steal the money in them.
there are extensive rules and regulations dealing with e-money.
electronic money generates an extremely large amount of paper.
banks will generally not recognize this form of money.

Question 64

After using her _______ card to make a purchase, Janet checks an electronic display to determine how much money is left on the card.
debit
smart
direct-purchase
direct deposit
credit

Question 65

When the Bank of Canada wants to slow down business activity and decrease the money supply, it
lowers the bank rate.
lowers the reserve requirement.
decreases government spending.
buys government securities.
raises the bank rate.

Question 66

If the reserve requirement was 10 percent, a $100 deposit could result in a ______ increase in new deposits for all banks in the system.
$200
$500
$1000
$10 000
$100 000

Question 67

Banks expand the money supply by
opening new chequing accounts.
earning higher profits.
paying interest on accounts.
printing money.
taking in deposits and lending money.

Question 68

A _______ is a bank's promise to pay a specified amount of money at a future date.
bankers' acceptance
electronic funds transfer
promissory note
bank loan
letter of credit

Question 69

An alternative bank that safeguards funds and estates in its care is called a(n)
trustee.
credit union.
trust company.
pension fund.
Schedule B bank.

Question 70

If the Bank of Canada wants to decrease the money supply, it can _________; if it wants to increase the money supply, it can ____________.
sell government securities; buy government securities
raise the bank rate; buy government securities
increase the value of the Canadian dollar; decrease the value of the Canadian dollar
lower the bank rate; sell government securities
buy government securities; sell government securities

Question 71

Which of the following is most likely to get an unsecured loan?
A retail florist shop with collateral
A wholesale grocer with a marginal credit history
A lawyer with collateral
A large manufacturing firm with an excellent credit rating
A farmer

Question 72

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

Question 73

The interest rate at which chartered banks can borrow from the Bank of Canada is the
preferred rate.
prime rate.
prime plus 1 percent.
bond rate.
bank rate.

Question 74

Which of the following Bank of Canada actions would be consistent with an expansionary policy?
Sell government securities
Raise the margin requirement
Buy government securities
Raise the reserve requirement
Raise the bank rate

Question 75

The main purpose of the Bank of Canada is to
set prime interest rates.
assist in the merger of troubled banks with healthier institutions.
bail out banks like the Northland and CCB.
deregulate the banking industry.
control the nation's money supply.

Question 76

Jack is one of the bank's most creditworthy customers. The interest rate available to Jack is the
reserve requirement rate.
overnight rate.
prime rate.
discount rate.
rediscount rate.

Question 77

Which of the following might the Bank of Canada do to increase the money supply?
Sell government securities
Increase the bank rate
Impose a new tax
Buy government securities
Increase the reserve rate

Question 78

If the Bank of Canada wanted to stimulate business activity, it could ______, but if it wanted to slow down business activity it could ______.
sell government securities; raise the reserve requirement
raise the margin requirement; raise the reserve requirement
buy government securities; sell government securities
sell government securities; buy government securities
raise the bank rate; lower the bank rate

Question 79

Which of the following will result in an decrease of the money supply?
An increase in taxes
Purchase of securities by the Bank of Canada
A decrease in the bank rate
An increase in the discount rate
A decrease in reserve requirements

Question 80

Which of the following provides cooperative savings and lending services to its members?
Schedule B bank
Trustee
Credit union
Trust company
Pension fund