Deck 14: Money and Banking

Question 1

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.

Answer 1

C

Question 2

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.

Answer 2

A

Question 3

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

Answer 3

E

Question 4

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 5

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 6

Which of the following is a form of money?

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

Question 7

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.

Question 8

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 9

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

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

Question 10

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 11

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 12

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 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 influences the value of money?

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

Question 15

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 16

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 17

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 18

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 19

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

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

Question 20

Different parts of a cow are worth different amounts, thus violating the money characteristic of being

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

Question 21

As of January 2015, the value of M-1 was

A) $38.5 million.
B) $987 million.
C) $730.3 billion.
D) $975.2 billion.
E) $1.6 trillion.

Question 22

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 23

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 24

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 25

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 26

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.

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

Question 27

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 28

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 29

If Sally says she has purchased $250.00 worth of groceries, she is referring to money as

A) a unit of account.
B) a method of divisibility.
C) a medium of exchange.
D) a store of value.
E) a measure of stability.

Question 30

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 31

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 32

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 33

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

Question 34

As of January 2015, the value of M-2 was

A) $34.5 million.
B) $443.5 million.
C) $1.270 trillion.
D) $212.4 billion.
E) $967.5 billion.

Question 35

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 36

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 37

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 38

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) None of these is part of the M-1 money supply.

Question 39

All products can be valued and measured in terms of dollars. This illustrates the ________ function of money.

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

Question 40

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 41

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 42

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 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

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 45

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 46

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.

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

Question 47

________ 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 48

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 49

________ 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 50

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

A) writing cheques on her term deposit account.
B) writing cheques on her demand deposit account.
C) using a banker's acceptance.
D) writing a promissory note.
E) using a letter of credit.

Question 51

Canadians hold a total of ________ MasterCard and Visa credit cards.

A) 5 million
B) 20.6 million
C) 43 million
D) 76.3 million
E) 190.8 million

Question 52

In Canada, the value of goods bought with credit cards each year is about

A) $180 million.
B) $980 million.
C) $30 billion.
D) $150 billion.
E) $1.2 trillion.

Question 53

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 54

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 55

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

A) money market funds and accounts.
B) time deposits.
C) currency.
D) certified holdings.
E) demand deposits.

Question 56

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 57

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 58

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

A) CDs
B) Time deposits
C) Savings accounts
D) Credit cards
E) Chequing accounts

Question 59

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 60

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 61

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.

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

Question 62

In January 2015, Canadian chartered banks had assets totalling

A) $112 billion.
B) $298 billion.
C) $563 billion.
D) $2.29 trillion.
E) $4.65 trillion.

Question 63

Which of the following reasons is the primary motivator for a bank 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 64

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 65

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 66

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 67

The prime rate of interest is the rate charged

A) on time deposits.
B) on consumer installment loans.
C) to major business customers.
D) on mortgages.
E) to the most risky borrowers.

Question 68

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 69

A ________ 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

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 71

Canada has a ________ banking system.

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

Question 72

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 73

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?

A) Bank loan
B) Letter of credit
C) Promissory note
D) Deposit
E) Electronic funds transfer

Question 74

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 75

Cynthia is concerned about electronic money because

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

Question 76

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 77

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 78

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 79

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 80

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

A) 4 billion
B) 100 million
C) 500 million
D) 1 billion
E) 7 billion