Busi 1000 Test bank PDF

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Chapter 14 Money and Banking14 Muliple-Choice Quesions 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 Answer: A Dif: 2 Type: MC Page Ref: 346 Skill: Comprehension Objecive: 14. Money is A) important in a market econom...

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Chapter 14 Money and Banking

14.1 Multiple-Choice Questions

1) 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 Answer: A Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

2) 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: C Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

3) 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 Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

4) All of the following are criteria for something to be considered as money except A) divisibility. B) stability. C) durability. D) portability. E) value. Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 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. Answer: D Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

6) 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. Answer: B Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

7) 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. Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

8) Because meat spoils, it fails to meet the money criterion of being A) valuable. B) divisible. C) stable. D) durable.

E) portable. Answer: D Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 9) 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. Answer: B Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

10) 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. Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

11) 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. Answer: A Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

12) 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. Answer: B Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 13) 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. Answer: C Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

14) A dollar can be exchanged for four quarters thus demonstrating that it is A) durable. B) stable. C) divisible. D) portable. E) valuable. Answer: C Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

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. Answer: B Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

16) 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. Answer: C Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 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. Answer: A Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

18) 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: E Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

19) 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. Answer: E Diff: 2

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

20) Which of the following influences the value of money? A) The supply of money B) Barter C) Durability D) Divisibility E) Portability Answer: A Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 21) 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

Answer: D Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

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 B) Currency and demand deposits C) Credit card cash advances D) The number of new homes started in the month E) Time deposits Answer: B Diff: 2

Type: MC

Page Ref: 346

Skill: Knowledge Objective: 14.1

23) 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 Answer: E Diff: 2

Type: MC

Skill: Knowledge Objective: 14.1

Page Ref: 346

24) 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. Answer: C Diff: 2

Type: MC

Page Ref: 346

Skill: Knowledge Objective: 14.1 25) 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. Answer: C Diff: 3

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

26) 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 Answer: E Diff: 3

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

27) 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 Answer: D Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

28) 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: B Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 29) 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 Answer: C Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

30) 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 Answer: B Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

31) 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 Answer: B Diff: 1

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

32) 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. Answer: A Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1 33) 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 Answer: D Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

34) 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 Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

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. Answer: A Diff: 2

Type: MC

Page Ref: 346

Skill: Comprehension Objective: 14.1

36) 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.

Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Knowledge Objective: 14.1 37) 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. Answer: B Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1

38) 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 Answer: E Diff: 2

Type: MC

Page Ref: 346

Skill: Knowledge Objective: 14.1

39) 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. Answer: C Diff: 2

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

40) 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 Answer: E Diff: 2

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1 41) 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 Answer: D Diff: 1

Type: MC

Skill: Knowledge Objective: 14.1

Page Ref: 347

42) 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. Answer: B Diff: 2

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

43) ________ 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 Answer: C Diff: 2

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

44) 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. Answer: A Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1 45) 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. Answer: C Diff: 3

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

46) 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 Answer: D Diff: 3

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1

47) 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. Answer: E Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1

48) 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 Answer: E Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1 49) 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 Answer: D Diff: 2

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

50) ________ 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 Answer: D Diff: 1

Type: MC

Page Ref: 347

Skill: Knowledge Objective: 14.1

51) 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. Answer: B Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.2

52) 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 Answer: B Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1 53) 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." Answer: E Diff: 2

Type: MC

Page Ref: 347

Skill: Comprehension Objective: 14.1

54) 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 Answer: C Diff: 1

Type: MC

Page Ref: 348

Skill: Knowledge Objective: 14.2

55) 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 Answer: D Diff: 1

Type: MC

Page Ref: 348

Skill: Knowledge Objective: 14.2

56) The main function of financial institutions is to A) o...