Question 1

Identify the five core principles of Money and Banking.

Accepted Answer

The answer of Identify the five core principles of Money...

Question 2

The amount of information an individual would seek before making a decision:

Accepted Answer

A) Is about the same across all individuals 
B) Varies directly with the importance of the decision 
C) Is the same across all decisions but varies across individuals 
D) Depends on how much time it will take to get the information regardless of the decision

Question 3

How do central banks, like the U.S.Federal Reserve, contribute to the welfare of a society?

Accepted Answer

The answer of How do central banks, like the U.S.Federal...

Question 4

The statement "risk requires compensation" implies that people:

Accepted Answer

A) Do not take risk 
B) Only accept risk when they absolutely have to 
C) Will only accept risk when they are rewarded for doing so 
D) Avoid risk at all cost

Question 5

Studying money and banking through five core principles is helpful because:

Accepted Answer

A) Studies have shown students have a difficult time remembering more than five topics 
B) Everything in economics can be reduced to five core principles 
C) Money and banking can undergo drastic changes overtime, but the five principles do not 
D) These five principles are understood by everyone

Question 6

Suppose that IBM considers expanding its operations.The expansion will require $400 million for two new factories which the corporation plans to raise by selling stock and bonds.Which of the core principles will come into play as investors decide whether or not to buy the stock and the bonds?

Accepted Answer

The answer of Suppose that IBM considers expanding its operations.The...

Question 7

If the U.S.Supreme Court ruled that states could no longer require people to have auto insurance, do you think most people would cancel their policies? Explain.

Accepted Answer

The answer of If the U.S.Supreme Court ruled that states...

Question 8

Investing in financial instruments in today's economy:

Accepted Answer

A) Is an activity practiced only by the wealthy 
B) Involves costly transactions 
C) Requires a relatively large sum of money to invest (more than $100,000) 
D) Is made easier by the use of mutual funds

Question 9

The New York Stock Exchange is an example of:

Accepted Answer

A) A financial instrument 
B) A financial institution 
C) A financial market 
D) A bank

Question 10

Identify which item is not one of the six parts of the financial system.

Accepted Answer

A) Financial markets 
B) Central banks 
C) Credit cards 
D) Financial institutions

Question 11

The central bank of the United States is:

Accepted Answer

A) The Bank of America 
B) The Federal Reserve System 
C) The U.S.Treasury 
D) Citibank

Exam 1: An Introduction to Money and the Financial System