Deck 17: Money and the Banking System

Question 1

When Skye purchases a meal at Hardee's, she will probably use the most common form of money today, which is

A) gold.
B) a credit card.
C) a debit card.
D) currency.
E) bartering.

Answer 1

D

Question 2

It is easy for Mark to compare the differences in price when he is shopping for a new truck because money is a

A) measure of value.
B) medium of exchange.
C) measure of exchange.
D) store of value.
E) standard intermediary.

Answer 2

A

Question 3

Money that is held and spent later represents a ____, or a means for retaining and accumulating wealth.

A) denomination
B) near-money
C) common denominator
D) store of value
E) standard unit

Answer 3

D

Question 4

M&B Bank
Ken is a senior manager at M&B Bank.Initially, he started as a front counter worker and slowly progressed up the career ladder.In his role as a senior manager, Ken is keeping a keen eye on the industry, the Federal Reserve System, and the bank's competitors.Ken's previous boss did not do that well, and as a result the bank had suffered.
Several employees have pointed out that many businesses are not aware of the procedures for or a systematic way to evaluate the creditworthiness of their customers, collect past-due payments from customers, and protect their businesses from such losses.Based on feedback from several employees, M&B has decided to offer credit-counseling workshops for individuals and small businesses.
Refer to M&B Bank.While offering the credit-counseling workshops, the facilitator lists the five Cs of credit.Which of the following refers to the borrower's attitude toward credit obligations?

A) Capacity
B) Character
C) Collateral
D) Capital
E) Conditions

Question 5

In many stores in Canada, U.S.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 a

A) medium of exchange.
B) measure of exchange.
C) store of value.
D) foreign exchange currency.
E) measure of value.

Question 6

Anything used by a society to purchase products and services or resources is called

A) money.
B) barter.
C) capital.
D) cash.
E) funds.

Question 7

Michael's total purchase at Subway is €7.58.He pays with a ten euro bill knowing he will receive the appropriate change because money is

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

Question 8

Usually money is used as a

A) store of wealth.
B) means of payment.
C) medium of exchange.
D) measure of value.
E) All are acceptable uses of money.

Question 9

Community Bank
Jeffrey is the training manager for the Community Bank in Maryland.Jeffrey has developed a training programme for all new employees that emphasises understanding the basics of money.Jeffrey and the bank's management believe that if the employees understand the basics of money, they can utilise the information in their own personal finances as well as guide and answer questions from bank customers.
The bank recently hired Laila.She was hired at a high-level position because she brought with her extensive bank management experience.Laila's responsibilities included making sure that the reserve requirement would always be met and keeping track of the interest rate that the Federal Reserve System charged for loans to member banks.
Refer to Community Bank.In his training, when Jeffrey suggests that money should retain its value over time, which of the following characteristics is he referring to?

A) Difficulty of counterfeiting
B) Liquidity
C) Divisibility
D) Stability
E) Portability

Question 10

M&B Bank
Ken is a senior manager at M&B Bank.Initially, he started as a front counter worker and slowly progressed up the career ladder.In his role as a senior manager, Ken is keeping a keen eye on the industry, the Federal Reserve System, and the bank's competitors.Ken's previous boss did not do that well, and as a result the bank had suffered.
Several employees have pointed out that many businesses are not aware of the procedures for or a systematic way to evaluate the creditworthiness of their customers, collect past-due payments from customers, and protect their businesses from such losses.Based on feedback from several employees, M&B has decided to offer credit-counseling workshops for individuals and small businesses.
Refer to M&B Bank.As Ken keeps an eye on the industry, he notices many changes.Which of the following is not a change that Ken would have noticed or obtained information about?

A) Importance of customer service
B) Consolidation and mergers
C) Increased competition from nonbank competitors
D) Growth in online banking
E) Decrease in the use of credit cards and debit cards

Question 11

Which of the following statements is false?

A) Inflation is a general rise in the level of prices.
B) Inflation can affect an individual's purchasing power when money is used as a store of value.
C) The consumer price index is based on two factors: the cost of housing and the cost of transportation.
D) The consumer price index measures the changes in prices of goods purchased by a typical consumer.
E) The base amount for the consumer price index is 100.

Question 12

A system of exchange in which goods and services are traded directly for other goods and services is called a(n) ____ system.

A) Monetary
B) Barter
C) exchange
D) mercantile
E) trading

Question 13

Community Bank
Jeffrey is the training manager for the Community Bank in Maryland.Jeffrey has developed a training programme for all new employees that emphasises understanding the basics of money.Jeffrey and the bank's management believe that if the employees understand the basics of money, they can utilise the information in their own personal finances as well as guide and answer questions from bank customers.
The bank recently hired Laila.She was hired at a high-level position because she brought with her extensive bank management experience.Laila's responsibilities included making sure that the reserve requirement would always be met and keeping track of the interest rate that the Federal Reserve System charged for loans to member banks.
Refer to Community Bank.In giving examples to new employees, Jeffrey has indicated that when customers put their money in a bank, some are looking to retain and accumulate wealth.This refers to which of the following functions of money?

A) Money as a measure of value
B) Money as a portable exchange
C) Money as a store of value
D) Money as a medium of exchange
E) Money as a clearinghouse

Question 14

Community Bank
Jeffrey is the training manager for the Community Bank in Maryland.Jeffrey has developed a training programme for all new employees that emphasises understanding the basics of money.Jeffrey and the bank's management believe that if the employees understand the basics of money, they can utilise the information in their own personal finances as well as guide and answer questions from bank customers.
The bank recently hired Laila.She was hired at a high-level position because she brought with her extensive bank management experience.Laila's responsibilities included making sure that the reserve requirement would always be met and keeping track of the interest rate that the Federal Reserve System charged for loans to member banks.
Refer to Community Bank.Because of her previous banking experience, Laila knows that a reserve requirement is

A) the percentage of its deposits a bank must retain, either in its own vault or on deposit with its Federal Reserve District Bank.
B) the percentage of its loans a bank must retain with its Reserve District Bank as deposits.
C) the percentage of its deposits a bank must send in taxes.
D) the percentage of its credit card balance a bank must retain in the customers' accounts.
E) certain accounts a bank must reserve for really wealthy customers.

Question 15

Community Bank
Jeffrey is the training manager for the Community Bank in Maryland.Jeffrey has developed a training programme for all new employees that emphasises understanding the basics of money.Jeffrey and the bank's management believe that if the employees understand the basics of money, they can utilise the information in their own personal finances as well as guide and answer questions from bank customers.
The bank recently hired Laila.She was hired at a high-level position because she brought with her extensive bank management experience.Laila's responsibilities included making sure that the reserve requirement would always be met and keeping track of the interest rate that the Federal Reserve System charged for loans to member banks.
Refer to Community Bank.One of Laila's responsibilities is keeping track of the interest rate that the Federal Reserve System charges for loans to member banks.Which of the following should Laila be tracking?

A) Federal rate
B) FRS rate
C) Reserve rate
D) Discount rate
E) System rate

Question 16

A single standard that is used to assign value to or compare values of products or services is called

A) a store of value.
B) barter.
C) a medium of exchange.
D) capital.
E) a measure of value.

Question 17

In explaining money to his twelve-year-old, Mike, the president of a small business, said that money is "symbolic." This should be correctly interpreted to mean that money is

A) an artificial device that aids in the exchange of resources for products, services, and resources.
B) a tangible asset.
C) meaningless.
D) abstract rather than practical.
E) beneficial to the buyer, not the seller.

Question 18

The UK trades a shipment of wheat to Saudi Arabia in exchange for a shipment of oil.This type of arrangement is called

A) an exchange medium.
B) barter.
C) an auction.
D) a moneyless transfer.
E) electronic commerce.

Question 19

Because it is the common denominator that we use to compare products and decide which ones we will buy, money functions as a(n)

A) accepted resource.
B) commercial tool.
C) measure of value.
D) instrument of socialism.
E) medium of exchange.

Question 20

Ricardo Martinez 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 €3,000 to offset his college expenses this fall.For Ricardo, money is serving as a

A) measure of the current exchange rate.
B) medium of exchange.
C) measure of value.
D) store of value.
E) barter.

Question 21

Nancy Murray has €6,000 in demand deposits with the Teachers Credit Union.This means that she has €6,000 in

A) savings accounts.
B) checking accounts.
C) certificates of deposit.
D) IRA accounts.
E) Keogh accounts.

Question 22

Along with stability, all of the following are characteristics of money except

A) durability.
B) profitability.
C) difficulty of counterfeiting.
D) portability.
E) divisibility.

Question 23

The percentage of deposits that a bank must retain for depositors is called

A) the demand deposit.
B) a trust fund.
C) amortisation.
D) collateral.
E) a reserve requirement.

Question 24

Thad deposits €2,000 in an interest-bearing savings account.This means that Thad has €2,000 in

A) demand deposits.
B) time deposits.
C) money supply.
D) checking accounts.
E) available accounts.

Question 25

During periods of high inflation, money loses which essential characteristic?

A) Divisibility
B) Portability
C) Stability
D) Durability
E) Difficulty of counterfeiting

Question 26

At the bank where Natasha works, loans are made on the money that customers deposit and then in turn on what borrowers deposit, which allows the bank to make more loans.This is referred to as

A) reserve requirements.
B) duplicate lending.
C) open-market operations.
D) margin lending.
E) deposit expansion.

Question 27

Time deposits include

A) near-monies.
B) demand deposits.
C) NOW accounts.
D) checking accounts.
E) negotiable order of withdrawal accounts.

Question 28

The Senate confirms the appointment of each member of the board of governors for a term of ____ year(s).

A) One
B) five
C) eight
D) Ten
E) Fourteen

Question 29

Neal has €25,000 invested in a money-market mutual fund.This type of fund is an example of

A) near-monies.
B) a demand deposit.
C) M₃.
D) a checking account.
E) an insurance policy.

Question 30

What is commercial paper?

A) A specific amount on deposit in a checking account that is owned by corporations
B) A synonym for near-monies
C) Interest-bearing bonds offered by large corporations
D) Long-term bonds issued by only the largest corporations
E) Short-term promissory notes issued by large corporations

Question 31

If a subcultural group in Africa started its own country, it should not use tissue paper to print currency because money should have

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

Question 32

Amounts held on deposit in checking accounts are

A) demand deposits.
B) the M₂ supply of money.
C) time deposits.
D) near-monies.
E) transfer deposits.

Question 33

Jeff Becker is a truck driver for Eastside Distributors.As part of his job, he not only delivers merchandise but is involved in selling, inventory control, and collecting on accounts.Tuesday was a banner collection day for Jeff.He collected money on nearly every account.However, he did not take the time to count the cash carefully because he also had to take over another truck driver's route.He knew that according to company policy, he would have to make up any shortage.When he checked in for the day, the bookkeeper told him that one of his twenties was "no good." Jeff demanded a second expert opinion because money is

A) divisible.
B) portable.
C) stable.
D) durable.
E) difficult to counterfeit.

Question 34

Which of the following pairs of tools both have the same effect on the economy?

A) Increasing the reserve requirement and decreasing the discount rate
B) Buying government securities and increasing the discount rate
C) Decreasing the reserve requirement and selling government securities
D) Selling government securities and increasing the reserve requirement
E) Buying government bonds and increasing the reserve requirement

Question 35

In her college economics class, Kelly will give a report on money.The title of her paper is "Money: It Doesn't Disintegrate When Handled or Melt in the Sun." Which of the five essential elements of money will she talk most about?

A) Divisibility
B) Portability
C) Stability
D) Durability
E) Difficulty to counterfeit

Question 36

The ____ requires lenders to clearly state the annual percentage rate and total finance charge for a consumer loan.

A) Equal Employment Opportunity Act
B) Equal Pay Act
C) Truth-in-Lending Act
D) Civil Rights Act
E) Fair Credit Reporting Act

Question 37

Brian can easily carry €100 in his wallet because money is

A) the same as credit cards.
B) divisible.
C) stable.
D) portable.
E) durable.

Question 38

The minimum amount of the purchase price of certain stock transactions that must be paid in cash is called the

A) down payment.
B) reserve requirement.
C) collateral.
D) margin.
E) line of credit.

Question 39

All of the following are time deposits except

A) money-market mutual fund shares.
B) short-term government securities.
C) an interest-bearing savings account.
D) a checking account.
E) certificates of deposit.

Question 40

Which of the following would not be included in the M₁ definition of money?

A) Coins
B) Paper currency
C) Small-denomination CDs
D) Travelers checks
E) Demand deposits

Question 41

Every month, Justin contributes 5 percent of his income and his employer contributes an additional 5 percent to guarantee that Justin will have a regular income when he retires.This is known as

A) an insurance fund.
B) investment banking.
C) social security.
D) a pension fund.
E) retirement planning.

Question 42

Suzanne is considered a member of her financial institution, which provides checking, savings, and other financial services.She is eligible for membership because she is a teacher.This financial institution is a

A) national bank.
B) savings and loan association.
C) mutual savings bank.
D) commercial bank.
E) credit union.

Question 43

If Jamie wanted to purchase Disney stock using borrowed money and had €4,000 of her own money to use, what is the maximum amount of stock she can purchase with a margin requirement of 50 percent?

A) €2,000
B) €4,000
C) €0
D) €8,000
E) €6,000

Question 44

Commercial banks have experienced competition from all of the following except

A) savings and loan associations.
B) credit unions.
C) federal reserve banks.
D) mutual savings banks.
E) brokerage firms.

Question 45

Maya Michey graduated from college and is seeking employment in the banking industry.She believes she has what it takes to be successful because she

A) is driven to earn a big salary.
B) is looking for an easy job.
C) is honest and likes to interact with people.
D) doesn't want to work long hours.
E) knows a lot of employees at local banks.

Question 46

The usual passbook savings account at a commercial bank earns

A) between 0.10 and 0.90 percent.
B) about 1.5 percent.
C) between 1.5 and 5.0 percent.
D) a rate that is adjusted annually.
E) a rate that is adjusted every two years.

Question 47

A financial institution that is owned by its depositors is called a(n)

A) Ordinary share bank.
B) mutual savings bank.
C) insurance company.
D) savings and loan association.
E) national bank.

Question 48

A document stating that the bank will pay the depositor a guaranteed interest rate for money left on deposit for a specified period of time is a(n)

A) certificate of deposit.
B) check.
C) line of credit.
D) revolving credit agreement.
E) electronic funds transfer.

Question 49

Judy Martinez, owner of Judy's Fashions, received a €12,000 tax refund.She deposited the money in Chase Bank.The terms of the agreement are that she must leave the money on deposit for three years and the bank will pay her 2.0 percent interest.Her account is a

A) checking account.
B) NOW account.
C) Super NOW account.
D) certificate of deposit.
E) commercial draft.

Question 50

Jack owns a chain of health food stores that has been growing rapidly.He decides that new, larger locations would be extremely successful, and he sells stock for the first time to obtain the needed funding to build the new stores.What type of financial institution can assist Jack in the new ordinary share issue?

A) Finance company
B) Commercial bank
C) Insurance company
D) Investment banking firm
E) Brokerage firm

Question 51

Credit union members usually are

A) people who are members that deposit money in the credit union.
B) employees of a particular company.
C) those who live in a particular community.
D) people in a particular profession.
E) All of these answers are correct.

Question 52

Like other businesses, a bank's primary mission is to

A) store money.
B) supply money.
C) provide check-clearing services.
D) meet the needs of its customers while earning a profit.
E) give financial advice.

Question 53

Banks must meet certain requirements before they receive a charter, or permission to operate from authorities, because

A) bankers can't be trusted.
B) they own lots of money.
C) they control the companies to which they make loans.
D) there are thousands of them in the nation.
E) they deal with money belonging to other individuals and firms.

Question 54

Which of the following may offer as high as 2 percent rate of return?

A) Passbook savings account
B) Checking account
C) Certificate of deposit
D) NOW account
E) Revolving line of credit

Question 55

A written order for a bank or other financial institution to pay a stated amount to a specified business or person is called a

A) promissory note.
B) deposit slip.
C) debit memorandum.
D) check.
E) receipt.

Question 56

Pile & Joseph (P&J) Enterprises wants to obtain long-term financing for a commercial real estate project, but it does not want to go to a regular bank for help.Which of the following institutions could help P&J?

A) Insurance company
B) Stock market
C) Local credit union
D) Board of governors of the Federal Reserve
E) Federal Reserve district bank

Question 57

GE Capital is an example of a(n)

A) credit union.
B) insurance company.
C) finance company.
D) retailer.
E) investing banking firm.

Question 58

Kyle uses a local financial institution for his banking needs such as a checking 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.This describes a

A) commercial mutual bank.
B) mutual funds bank.
C) credit union.
D) savings and loan association.
E) national bank.

Question 59

Joe Barnes opened up an account at Community Credit Union.He is allowed to write checks and earns interest as long as he keeps his account balance above €2,000.In all likelihood, he opened a

A) certificate of deposit.
B) savings account.
C) mutual bank account.
D) NOW account.
E) certified account.

Question 60

The business that collects premiums and then provides long-term financing for large real estate projects is a(n)

A) commercial bank.
B) credit union.
C) mutual savings bank.
D) Federal Reserve Bank.
E) insurance company.

Question 61

Which of the following is not an upcoming change within the banking industry that experts tend to agree upon?

A) Decreased use of credit and debit cards
B) Additional emphasis on evaluating creditworthiness of applicants
C) Government regulation increases
D) Reduction of the number of banks, S&Ls, and credit unions
E) Continued online banking growth

Question 62

Which of the following is most commonly used to obtain cash from an ATM?

A) Credit cards
B) Checks
C) Short-term loans
D) Debit cards
E) Electronic transfers

Question 63

A loan that is approved before the money is actually needed is called a(n)

A) collateral loan.
B) mortgage.
C) amortisation.
D) security note.
E) line of credit.

Question 64

Walter Manufacturing Company needs to obtain appropriate financing for plant expansion.You would recommend a

A) short-term loan.
B) line of credit.
C) revolving credit agreement.
D) long-term business loan.
E) one-year loan.

Question 65

Depositors are penalised for early withdrawal of funds from

A) demand deposits.
B) certificates of deposit.
C) lines of credit.
D) notes payable.
E) None of these answers is correct.

Question 66

If Boulder Co.fails to make payments on its long-term business loan for earthmoving equipment, the bank will repossess it because the equipment serves as

A) a line of credit.
B) insurance.
C) collateral.
D) credit.
E) capital.

Question 67

A short-term loan is usually repaid within ____ year(s) or less.

A) seven
B) three
C) one
D) five
E) ten

Question 68

The average repayment term for long-term business loans is generally

A) less than one year.
B) between two and three years.
C) between three and four years.
D) between three and seven years.
E) between five and ten years.

Question 69

A means for performing financial transactions through a computer terminal or telephone hookup is

A) a NOW transaction.
B) an electronic funds transfer system.
C) the Federal Reserve System.
D) the clearinghouse.
E) an open-market operation.

Question 70

Vance Co.is required to provide collateral in order to obtain a long-term business loan.Which of the following would not be acceptable collateral to most lenders?

A) Stocks
B) Liabilities
C) Land
D) Equipment
E) Inventory

Question 71

Which of the following is considered the most important advantage of online banking for financial institutions?

A) Increased security
B) Lower cost of technology assistance for customers
C) Increased numbers of personnel
D) Larger numbers of technology-capable customers
E) Lower cost of processing large numbers of transactions

Question 72

Payless Shoes finds that it does not have enough cash to purchase new sandals for the upcoming summer season.What type of arrangement would you recommend for purchasing the shoes?

A) Collateral
B) Short-term business loan
C) Selling corporate bonds
D) Issuing stock
E) Long-term loan

Question 73

Marty obtained a three-year loan at 7.5 percent interest to buy a new BMW and used the car as collateral for the loan.After two years, the Stocker Finance Company repossessed Marty's car because

A) he took out a short-term loan.
B) the company wanted to resell the car at a higher interest rate.
C) he failed to repay the loan according to the loan terms.
D) he paid off the loan.
E) he never signed the original loan agreement.

Question 74

The amount a credit-card company charges a merchant for accepting credit cards depends on all of the following factors except the

A) number of credit-card transactions.
B) total amount of credit-card sales.
C) type of product the merchant sells.
D) brand of the credit card (Visa, MasterCard, Discover).
E) merchant's ability to negotiate fees.

Question 75

J Crew is concerned that it will need a significant amount of money to cover an upcoming shortfall of cash.Which is the best way to ensure that J Crew will be able to quickly get the money it needs?

A) Line of credit
B) Short-term business loan
C) Long-term business loan
D) Revolving credit agreement
E) Debit card

Question 76

Tavia Jacobson is the owner of Jacobson's Home Interiors.She would like to begin accepting Visa, MasterCard, or Discover credit cards, but she is concerned about the cost.As a merchant she should expect to pay between ____ percent to the credit-card company for processing credit-card transactions.

A) 1 and 2
B) 1 and 3
C) 1.5 and 4
D) 2.5 and 5
E) 2 and 6

Question 77

When you make a purchase with a ___, funds are electronically subtracted from your bank account at the moment the purchase is made.

A) credit card
B) check
C) debit card
D) short-term loan
E) NOW checking account

Question 78

Real or personal property that a firm or individual owns and that is pledged as security for a loan is called

A) a security deposit.
B) a mortgage deposit.
C) an amortisation.
D) collateral.
E) stocks and bonds.

Question 79

Brandy uses her debit card for most of her everyday purchases.The main reason she uses her debit card is probably because

A) she does not want to pay for her purchases right away.
B) she finds it more convenient than writing checks.
C) her checking account balance is very low.
D) debit cards typically offer cash back bonuses.
E) she can wait for the bill to come.

Question 80

A guaranteed line of credit is called a

A) short-term loan.
B) secured loan.
C) line-of-credit plus.
D) demand deposit.
E) revolving credit agreement.