Deck 18: Understanding Money and Banking

Question 1

Depending on the time of the year,salmon may be in short supply.Thus,using salmon as money violates the criterion of being

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

Answer 1

A
durable.

Question 2

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

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

Answer 2

C
divisible.

Question 3

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

Answer 3

B
As a store of value

Question 4

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 5

Since a salmon is large,bulky,and slippery,it fails to meet the money criterion of being

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

Question 6

Scott sneaked a peek at Laura's paycheque.He discovered that she makes $200 a month more than he does,and 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 7

Which of the following is a form of money?

A) Japanese yen
B) Bonds
C) A gold medallion
D) A Visa credit card
E) All of these are money

Question 8

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 9

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 10

Modern paper currency is light and easy to handle,thus meeting the criterion of

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

Question 11

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 12

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

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

Question 13

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 14

Without money,we would be bogged down in a system of barter.This illustrates the ________ function of money.

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

Question 15

As early as ________ coins were being used,and paper money came into existence around ________.

A) 600 BCE; 1200 CE
B) 1614; the later part of the 16th century
C) 1700; early 1800
D) 1900; 1930
E) 600; 1200

Question 16

Money is

A) credit cards.
B) tokens that represent a country's resources that are accepted in every place of the world.
C) any object generally accepted by people as payment for goods and services.
D) a reward for an individual's efforts.
E) wealth.

Question 17

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 18

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

A) Development of the central bank
B) Discovery of gold
C) Invention of the credit card
D) The use of bonds
E) Introduction of money

Question 19

Wealth is

A) the value of everything you own.
B) the total amount of cash you hold.
C) how many children you have.
D) the total of all your savings.
E) the value of your portfolio.

Question 20

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

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

Question 21

As of November 2011,the value of M-2 was $________.

A) 134.5 million
B) 843.5 million
C) 400 billion
D) 796 billion
E) 1.1 trillion

Question 22

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 23

Which of the following influences the value of money?

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

Question 24

Demand deposits include

A) money in chequing accounts.
B) time deposits.
C) savings accounts.
D) money market mutual funds.
E) credit cards.

Question 25

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) cookie jar
D) certified cheque
E) time deposit

Question 26

The value of goods bought with credit cards in Canada in 2012 was

A) $500 million.
B) $1 billion.
C) $100 billion.
D) 300 billion.
E) $1 trillion.

Question 27

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

Question 29

In 2011,there were about 1.5 billion Bank of Canada notes in circulation,and about _________ of these were counterfeit.

A) 10 000
B) 61 000
C) 52 000
D) 443 000
E) it is not known how many counterfeit notes are in circulation

Question 30

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

Question 31

All of the following is 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 issuing companies.

Question 32

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

A) Currency
B) Time deposits
C) Chequing accounts
D) Money owed on credit cards
E) Money market mutual funds

Question 33

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 34

________ are operated by investment companies that bring together pools of assets from many investors and purchase 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 35

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

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

Question 36

A demand deposit is

A) the same as a time deposit.
B) a chequing account.
C) one that remains with the bank for a specified period of time.
D) the same as a regular savings account.
E) the least important type of money in our economic system.

Question 37

In 2011,what proportion of paper money in Canada was counterfeit?

A) 5 percent
B) 10 percent
C) 1 percent
D) 3 percent
E) less than one-tenth of one percent

Question 38

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 39

Money held by a financial institution that requires notice prior to making a withdrawal and that 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 40

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 41

Which of the following is correct with regard to recent changes in banking in Canada?

A) Banks are increasingly focusing on their role as intermediaries between depositors and borrowers.
B) Consumers are turning to electronic banks like President's Choice Financial.
C) Rather than making most of their profit from investment banking fees,banks now make most of their money from the spread between interest rates paid to depositors and the rates charged on loans.
D) During the last few years,large companies have increased their reliance on bank loans.
E) U.S.and other foreign banks are not allowed to do business in Canada.

Question 42

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 43

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 44

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 45

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

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

Question 46

________ is a revolutionary way of using electronic money over the internet.Traditional currency is used to buy electronic money that is then used to shop online.

A) The debit card
B) Ecash
C) The ecard
D) The NetCash card
E) The smart card

Question 47

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

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

Question 48

In 2011,credit card fraud cost financial institutions about $_________.

A) 5 million
B) 37 million
C) 366 million
D) 529 million
E) 1.2 billion

Question 49

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 50

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) does none of these things.

Question 51

When the Bank of Canada wants to decrease the money supply,it

A) raises the reserve requirement.
B) sells government securities.
C) buy government securities.
D) decrease the bank rate.
E) allows fewer credit cards to be produced.

Question 52

When the Bank of Canada wants to increase the money supply,it

A) raises the reserve requirement.
B) sells government securities.
C) buys government securities.
D) increase the bank rate.
E) allows more credit cards to be produced.

Question 53

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 54

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 55

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.

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

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 58

If the Bank of Canada wants to decrease the money supply,it can _________; if it wants to increase the money supply,it can ____________.

A) sell government securities; buy government securities
B) raise the bank rate; buy government securities
C) increase the value of the Canadian dollar; decrease the value of the Canadian dollar
D) lower the bank rate; sell government securities
E) buy government securities; sell government securities

Question 59

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 60

Which of the following is correct with regard to the Canadian banking system?

A) It is very similar to that in the U.S.,where there are many different banks,each with just a few branches.
B) The five largest Canadian banks account for about 50 percent of total bank assets.
C) Schedule A banks are those that are Canadian-owned and have no more than 10 percent of voting shares controlled by a single interest.
D) Because there a just a few large banks,banking is not very competitive in Canada.
E) Banks perform largely a storage function for money,and they do not generally help their customers manage their money.

Question 61

Which of the following is correct regarding ecash?

A) It is part of the established network of banks,cheques,and paper currency.
B) Ecash transactions are more expensive than handling cheques and paper records.
C) Ecash can be lost if the issuer's computer system crashes and the money that is "banked" in memory is lost.
D) Tight controls over ecash have been established to prevent hackers from stealing the money.
E) Ecash can be purchased only from banks.

Question 62

A debit card

A) is an identification card issued by a credit union to its members who must present the card when conducting business at the credit union.
B) allows the user to move money via digital electronic transmissions.
C) permits the holder to transfer money from his/her chequing account to the store's account.
D) permits the holder to purchase a product and to pay for it later.
E) is an identification card issued by a consumer finance company to its members who must present the card when conducting business at the company.

Question 63

Cynthia is genuinely concerned about electronic money because

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

Question 64

Which of the following is not a form of electronic technology for banking?

A) Direct withdrawals
B) Pay-by-phone systems
C) Personal cheques
D) Smart card
E) Direct deposits

Question 65

What is "ecash"?

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) None of these

Question 66

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) ecard
B) smart card
C) debit card
D) NetCash
E) ecash

Question 67

What term identifies 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 68

What term identifies a bank's promise to pay a foreign business firm (e.g.,a German firm)a certain amount if specified conditions are met?

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

Question 69

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 70

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

A) smart card.
B) ecard.
C) NetCash.
D) ecash.
E) debit card.

Question 71

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 72

Which of the following is a potential problem with ecash?

A) Hackers may break in.
B) Regulation and control are virtually non-existent.
C) There is no protection like that which covers government-controlled money systems.
D) A computer crash could wipe out an account forever.
E) All of these are potential problems.

Question 73

The largest Canadian bank in terms of revenue is the

A) Canadian Imperial Bank of Commerce (CIBC)
B) Bank of Montreal
C) Royal Bank of Canada
D) Bank of Nova Scotia
E) Toronto Dominion Bank (TD)

Question 74

Chartered banks offer which of the following services?

A) foreign exchange
B) automated teller machines
C) chequing accounts
D) debit and credit cards
E) all of these

Question 75

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 76

A(n)________ card is a credit card-sized computer that can be programmed with "electronic money."

A) e-
B) ecash
C) debit
D) smart
E) NetCash

Question 77

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 78

When a business has a secured loan and is unable to pay the loan back,a bank may

A) take back the loan.
B) allow them two years to come up with the money to pay back the loan.
C) confiscate and sell the collateral that was put up for the loan.
D) make them work at the bank until they have made enough money to pay back the loan.
E) do nothing.

Question 79

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 80

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.