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Exam 15: Money and the Financial System

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Question 1

Multiple Choice

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Ace Trucking is a manufacturer of expensive semi-trucks. If the company helps its customers finance the purchase of its trucks through its finance subsidiary, Ace Trucking would be acting as a(n)

A) insurance company.
B) brokerage firm.
C) credit union.
D) mortgage broker.
E) diversified firm.

F) B) and E)
G) A) and D)

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Question 2

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Historically, items as diverse as salt, fish, and rocks have been used by various cultures as money.

A) True
B) False

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Question 3

Multiple Choice

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You feel confident that a $20 bill will buy tomorrow what it can buy today. This exemplifies which characteristic of money?

Ethan is on his way to a concert, and he wants to deposit his paycheck, get cash, and check the balance of his bank account. Which type of electronic banking will he most likely use to complete these activities?

In the process of buying a new house, Christy's mortgage company requires her to work with an institution that will protect her from financial losses due to accidents, fire, theft, and natural disasters. Which type of institution can provide this protection to Christy and her new home?

Chuck and Paula want to buy their first house. They have done online research and determined that most houses having the features they want in the area where they live cost around $350,000. They hire a real estate agent who helps them find and buy a house for $345,000. What function of money does this scenario best describe?

Consumers often use ________ as a popular substitute for cash payments due to the convenience and wide acceptance by merchants, as well as the ability to pay for purchases at a later date.

What are the four major responsibilities of the Federal Reserve Board?

When Nellie's uncle died, he left her $5,000. Since she doesn't plan to spend the money anytime soon, she decides to open an account that will guarantee her a fixed interest rate of 5 percent for five years. With this type of account, if she withdraws funds before the 5 years pass, she will have to pay a substantial penalty. What type of account did Nellie open?

Parker wants to open a new bank account. He is looking for an account with a good interest rate that he can mostly use for savings but that he can also write a few checks from each month, to pay his mortgage and utility bills. Which type of account would Jeremy most likely open?

Every month, Olivia receives a bill in the mail from her mortgage company. By the first of each month, she must send back her payment, along with the bottom part of the bill, which includes her account information and the amount enclosed. She pays these mortgage bills using a form of payment that is essentially a written order to her bank to pay the mortgage company the specified amount from the money in her bank account. What form of payment is Olivia using in this scenario?

Food Nation, a large grocery store, has its own credit card that customers can sign up for to save money. Customers using this card receive special weekly coupons for items in the store. What type of credit card is described in this scenario?

What are the different nonbanking institutions available? How are nonbanking institutions different from banking institutions?

Mutual savings banks were originally established for groups of people (like fishermen) to have a safe place for their savings.

Alyssa wants to open an individual retirement account (IRA) to provide for her personal retirement needs. What is something she should consider when deciding between a traditional IRA versus a Roth IRA?

All of the following are actions the Federal Reserve Board takes as part of its regulatory functions EXCEPT

Amber is interested in investing her money in a mutual fund that invests in short-term debt securities issued by governments and large corporations. She also wants to be able to write checks and reinvest interest income from her investments. Which institution would Amber most likely choose for her investments?

Candace is an investor who purchases stock using credit. If the Federal Reserve Board lowers the margin requirement on buying stock with credit, what would Candace be likely to do?

If the Federal Reserve Board wants to increase the money supply in the economy, it will most likely

Which statement is TRUE regarding savings accounts?