Question 1

Nicole and Jesse are looking to purchase their first home. What is the name of the loan they will secure to buy their house?

Accepted Answer

A)   a home equity loan
B)   a mortgage
C)   a collateral loan
D)   a thrift
E)   a pensionF) A) and D)
G) B) and E)

Question 2

The characteristic of money that relates to it having a long, useful life is its

Accepted Answer

A)   stability.
B)   inability to be counterfeited.
C)   portability.
D)   durability.
E)   divisibility.F) A) and B)
G) B) and E)

Question 3

Daniel owns his own computer repair shop. Business has not been good, so Daniel's credit limit has been exhausted, and he needs a short-term loan to help him stay in business. Which institution, known as the lender of last resort, would Daniel most likely turn to for a loan?

Accepted Answer

A)   a brokerage firm
B)   an investment firm
C)   a finance company
D)   a mutual fund provider
E)   an insurance companyF) A) and B)
G) B) and E)

Question 4

Why would financial institutions want consumers to use debit cards?

Accepted Answer

A)   For every transaction, the financial institution receives a transaction fee from merchants.
B)   They give the institution a hard "paper trail" for customer transactions.
C)   They increase the amount of interaction the institution has with its customers.
D)   They allow institutions to replace all their banks with less expensive ATMs.
E)   They reduce the number of teller transactions and check processing costs.F) A) and B)
G) A) and C)

Question 5

A money market fund and a money market account differ in that

Accepted Answer

A)   a money market fund is a type of bank account, while a money market account is a type of mutual fund.
B)   money market funds offer slightly lower interest rates than money market accounts.
C)   a money market fund represents a pool of funds, while a money market account is basically a specialized, individual checking account.
D)   money market funds do not offer any of the services that money market accounts offer.
E)   money market accounts invest specifically in short-term debt securities issued by governments and large corporations, while money market funds are basically specialized, individual checking accounts.F) A) and C)
G) C) and D)

Question 6

Superior Savings Bank is holding $20 million in deposits, with a 10 percent reserve requirement. As a result, the bank must have reserves of $2 million. If the Federal Reserve Board reduced the reserve requirement to 5 percent, what would this mean for Superior Savings Bank?

Accepted Answer

A)   The bank could lend to customers the $1 million difference between the old reserve level and the new lower reserve level.
B)   The bank would be grandfathered into the old reserve level, so nothing would change.
C)   The bank could decide whether to keep the old reserve level or switch to the new lower reserve level.
D)   The bank would have to ask the Federal Reserve Board for permission to switch to the new lower reserve level.
E)   The bank would have to check with its customers before switching to the new lower reserve level.F) A) and B)
G) B) and E)

Question 7

What characteristic of money explains why many countries are discontinuing large denominated bills?

Accepted Answer

A)   portability
B)   divisibility
C)   difficulty to counterfeit
D)   stability
E)   exchangeabilityF) D) and E)
G) All of the above

Question 8

Anything that can be used for the payment of goods and services is defined as

Accepted Answer

A)   finance.
B)   commerce.
C)   money.
D)   a medium.
E)   value.F) A) and E)
G) A) and D)

Question 9

If businesses do not take money as payment for goods and services, consumers will have to find another means of paying for purchases. This is why ________ is probably the most important characteristic of money.

Accepted Answer

A)   divisibility
B)   acceptability
C)   portability
D)   stability
E)   durabilityF) B) and C)
G) A) and E)

Question 10

When Tonya uses her ________ to purchase a pair of shoes, the payment comes immediately out of her checking account to the account of the shoe store that sold her the shoes.

Accepted Answer

A)   credit card
B)   savings account
C)   certificate of deposit
D)   debit card
E)   time depositF) A) and E)
G) A) and D)

Question 11

Finance companies require borrowers to pledge personal collateral when obtaining a loan.

Accepted Answer

A) True 
 B)False

Question 12

A major difference between credit cards and debit cards is that

Accepted Answer

A)   credit cards result in immediate payment, while debit card payments take longer to process.
B)   debit cards offer a purchase "grace period," while credit cards do not.
C)   debit cards work like a check.
D)   debit cards provide a "paper trail," while credit cards do not.
E)   it is easier for computer hackers to steal credit card information than debit card information.F) All of the above
G) B) and D)

Question 13

Nico trades his tablet for a cellphone. Since both are the same value, there is no exchange of money. What concept does this scenario illustrate?

Accepted Answer

A)   discounting
B)   checking
C)   bartering
D)   accruing
E)   devaluingF) B) and E)
G) A) and D)

Question 14

After using the barter system, it was decided that a simpler medium of exchange needed to take place, and the result was to

Accepted Answer

A)   make it possible for any item to be freely converted to any other good upon agreement between parties.
B)   determine set values for types of goods, so they could be converted more easily to other goods.
C)   reduce the list of items that could be used as currency.
D)   decide on a single item that could be freely converted to any other good upon agreement between parties.
E)   add a middleman to all transactions to mediate between the buyer and seller.F) A) and C)
G) B) and C)

Question 15

All of the following are ways the Credit CARD Act of 2009 regulates the practices of credit card companies EXCEPT it

Accepted Answer

A)   limited credit to young adults.
B)   gave people less time to pay bills.
C)   required young adults under the age of 21 to have an adult co-signer or prove their income level.
D)   limited the ability of card issuers to raise interest rates.
E)   made clearer due dates on billing cycles.F) B) and E)
G) C) and D)

Question 16

The life expectancy of a $20 bill is estimated to be 7.9 years. What characteristic of money does this statement illustrate?

Accepted Answer

A)   divisibility
B)   durability
C)   acceptability
D)   stability
E)   portabilityF) B) and E)
G) B) and D)

Question 17

Tonya has a savings and checking account at Big City Bank. She is about to have some home repairs done, so she wants to make sure that she has enough funds in her checking account. She uses her smartphone to transfer money from her savings account into her checking account. Which method of electronic banking does this scenario best describe?

Accepted Answer

A)   a credit card transaction
B)   mutual fund management
C)   an automated teller machine transaction
D)   an automated clearinghouse transaction
E)   an electronic funds transferF) A) and B)
G) A) and C)

Question 18

________ is the study of how money is managed by individuals, companies, and governments.

Accepted Answer

A)   Accounting
B)   Banking
C)   Finance
D)   Economics
E)   BudgetingF) A) and E)
G) A) and B)

Question 19

Kate makes $3,000 a month working as a radiology technician. She wants to buy a used car for $10,000. She plans to save $2,000 per month for 5 months to buy the car. What function of money does this scenario best describe?

Accepted Answer

A)   measure of value
B)   medium of exchange
C)   yardstick of value
D)   means of bartering
E)   store of valueF) A) and B)
G) None of the above

Exam 15: Money and the Financial System

Nicole and Jesse are looking to purchase their first home. What is the name of the loan they will secure to buy their house?

Correct Answer
verified

The life expectancy of a $20 bill is estimated to be 7.9 years. What characteristic of money does this statement illustrate?

Correct Answer
verified

Correct Answer
verified

Daniel owns his own computer repair shop. Business has not been good, so Daniel's credit limit has been exhausted, and he needs a short-term loan to help him stay in business. Which institution, known as the lender of last resort, would Daniel most likely turn to for a loan?

Correct Answer
verified

Anything that can be used for the payment of goods and services is defined as

Correct Answer
verified

Why would financial institutions want consumers to use debit cards?

Correct Answer
verified

When Tonya uses her ________ to purchase a pair of shoes, the payment comes immediately out of her checking account to the account of the shoe store that sold her the shoes.

Correct Answer
verified

Kate makes $3,000 a month working as a radiology technician. She wants to buy a used car for $10,000. She plans to save $2,000 per month for 5 months to buy the car. What function of money does this scenario best describe?

Correct Answer
verified

A major difference between credit cards and debit cards is that

Correct Answer
verified

Superior Savings Bank is holding $20 million in deposits, with a 10 percent reserve requirement. As a result, the bank must have reserves of $2 million. If the Federal Reserve Board reduced the reserve requirement to 5 percent, what would this mean for Superior Savings Bank?

Correct Answer
verified

What characteristic of money explains why many countries are discontinuing large denominated bills?

Correct Answer
verified

If businesses do not take money as payment for goods and services, consumers will have to find another means of paying for purchases. This is why ________ is probably the most important characteristic of money.

Correct Answer
verified

After using the barter system, it was decided that a simpler medium of exchange needed to take place, and the result was to

Correct Answer
verified

The characteristic of money that relates to it having a long, useful life is its

Correct Answer
verified

Finance companies require borrowers to pledge personal collateral when obtaining a loan.

Correct Answer
verified

A money market fund and a money market account differ in that

Correct Answer
verified

All of the following are ways the Credit CARD Act of 2009 regulates the practices of credit card companies EXCEPT it

Correct Answer
verified

Nico trades his tablet for a cellphone. Since both are the same value, there is no exchange of money. What concept does this scenario illustrate?

Correct Answer
verified

________ is the study of how money is managed by individuals, companies, and governments.

Correct Answer
verified

Exam 15: Money and the Financial System

Nicole and Jesse are looking to purchase their first home. What is the name of the loan they will secure to buy their house?

Correct AnswerverifiedShow Answer

The life expectancy of a $20 bill is estimated to be 7.9 years. What characteristic of money does this statement illustrate?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Daniel owns his own computer repair shop. Business has not been good, so Daniel's credit limit has been exhausted, and he needs a short-term loan to help him stay in business. Which institution, known as the lender of last resort, would Daniel most likely turn to for a loan?

Correct AnswerverifiedShow Answer

Anything that can be used for the payment of goods and services is defined as

Correct AnswerverifiedShow Answer

Why would financial institutions want consumers to use debit cards?

Correct AnswerverifiedShow Answer

When Tonya uses her ________ to purchase a pair of shoes, the payment comes immediately out of her checking account to the account of the shoe store that sold her the shoes.

Correct AnswerverifiedShow Answer

Kate makes $3,000 a month working as a radiology technician. She wants to buy a used car for $10,000. She plans to save $2,000 per month for 5 months to buy the car. What function of money does this scenario best describe?

Correct AnswerverifiedShow Answer

A major difference between credit cards and debit cards is that

Correct AnswerverifiedShow Answer

Superior Savings Bank is holding $20 million in deposits, with a 10 percent reserve requirement. As a result, the bank must have reserves of $2 million. If the Federal Reserve Board reduced the reserve requirement to 5 percent, what would this mean for Superior Savings Bank?

Correct AnswerverifiedShow Answer

What characteristic of money explains why many countries are discontinuing large denominated bills?

Correct AnswerverifiedShow Answer

If businesses do not take money as payment for goods and services, consumers will have to find another means of paying for purchases. This is why ________ is probably the most important characteristic of money.

Correct AnswerverifiedShow Answer

After using the barter system, it was decided that a simpler medium of exchange needed to take place, and the result was to

Correct AnswerverifiedShow Answer

The characteristic of money that relates to it having a long, useful life is its

Correct AnswerverifiedShow Answer

Finance companies require borrowers to pledge personal collateral when obtaining a loan.

Correct AnswerverifiedShow Answer

A money market fund and a money market account differ in that

Correct AnswerverifiedShow Answer

All of the following are ways the Credit CARD Act of 2009 regulates the practices of credit card companies EXCEPT it

Correct AnswerverifiedShow Answer

Nico trades his tablet for a cellphone. Since both are the same value, there is no exchange of money. What concept does this scenario illustrate?

Correct AnswerverifiedShow Answer

________ is the study of how money is managed by individuals, companies, and governments.

Correct AnswerverifiedShow Answer

Correct Answer
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