Question 1

Rick owns and operates a small farm that produces vegetables and fruits. His friend Owen owns and operates a butcher shop that sells various kinds of meat. Rick often gives Owen vegetables and fruits in exchange for meat, and vice versa. This scenario best describes

Accepted Answer

A)   using fiat money.
B)   using "IOUs."
C)   purchasing.
D)   operating actions.
E)   bartering.F) C) and E)
G) All of the above

Question 2

Anna is a high school senior who wants to buy a prom dress that costs $250. She postpones purchasing the dress and gets a weekend job at a restaurant to save money for it. After two months of saving, she is able to buy the dress. What characteristic of money does this scenario best relate to?

Accepted Answer

A)   durability
B)   portability
C)   stability
D)   acceptability
E)   divisibilityF) A) and D)
G) D) and E)

Question 3

In reaction to the financial meltdown and severe recession between 2007 and 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. What does the full name of this act imply?

Accepted Answer

A)   that it intends to change the management of the banks that had to be bailed out
B)   that it intends to eliminate the ability of banks to create this type of financial problem in the future
C)   that it does not intend to interfere with how the banks are managed
D)   that it intends to keep the discount rates high to discourage borrowing
E)   that it intends to issue a directive to keep all information regarding derivative products confidentialF) None of the above
G) A) and B)

Question 4

During 2007-2008, which of the following contributed to the collapse of the financial markets?

Accepted Answer

A)   increasing housing prices
B)   mortgages with high-qualifying borrowers
C)   securities backed by subprime mortgages
D)   increasing value of bank assets
E)   a growing capital baseF) A) and C)
G) B) and E)

Question 5

U.S. money includes subtle colors in addition to the traditional green, as well as enhanced security features, such as a watermark, security thread, and color-shifting ink. What characteristic of money is being protected by these measures?

Accepted Answer

A)   likelihood to be accepted
B)   difficulty to counterfeit
C)   enhanced divisibility
D)   increased stability
E)   increased portabilityF) A) and B)
G) B) and E)

Question 6

When early settlers needed to buy farming equipment and supplies, they often would use the milk, eggs, and crops their farms produced as currency. As it pertains to money, this scenario depicts

Accepted Answer

A)   using materials that have their own value to society as money.
B)   using unlimited-supply commodities as money.
C)   using "IOUs" as money.
D)   bartering unlimited goods for limited goods.
E)   bartering unlimited goods for other unlimited goods.F) A) and E)
G) A) and D)

Question 7

When Congress originally established insurance funds for banks, it did so to

Accepted Answer

A)   prevent all future bank failures.
B)   encourage depositors to withdraw their money from banks.
C)   prevent banks and depositors from suing Congress for losses.
D)   save the banks from losses when depositors withdraw their money.
E)   make people feel secure about their savings.F) B) and E)
G) D) and E)

Question 8

Noelle has taught dance classes at a large studio for several years. Recently, she decided to start her own dance studio. As a function of money, this scenario describes Noelle's desire for ________ actions.

Accepted Answer

A)   entertainment
B)   financing
C)   operating
D)   investing
E)   essentialF) A) and D)
G) C) and D)

Question 9

The Federal Reserve Board's credit controls allows the Fed to

Accepted Answer

A)   determine who can and cannot have credit cards.
B)   determine whether a business can or cannot accept credit card payments.
C)   prevent certain items from being purchased with credit cards.
D)   raise and lower minimum down payment amounts and payment periods.
E)   raise and lower the prices for items that are commonly purchased with credit cards.F) A) and C)
G) All of the above

Question 10

Jonathan is a fifty-year-old construction-site foreman who invests money with a firm that, in turn, pools it with other investor dollars and invests the money in well-diversified securities, managed by an investment professional within the firm. In this scenario, Jonathan is investing in a(n)

Accepted Answer

A)   certificate of deposit.
B)   individual retirement account.
C)   mutual fund.
D)   banker's acceptance.
E)   time deposit.F) A) and B)
G) D) and E)

Question 11

A company that matches investors and borrowers with loans between $2,000 and $35,000 are referred to as

Accepted Answer

A)   investment bankers.
B)   automated clearinghouses.
C)   mutual fund lenders.
D)   peer-to-peer lenders.
E)   finance companies.F) A) and B)
G) B) and E)

Question 12

Josh and Camilla want to remodel the kitchen in their home. They decide to take out a home equity loan that will allow them to borrow money against the appraised value of their home. Which type of financial institution would Josh and Camilla most likely go to for this type of loan?

Accepted Answer

A)   a savings and loan association
B)   a commercial bank
C)   a credit union
D)   a mutual savings bank
E)   an independent savings bankF) A) and C)
G) C) and D)

Question 13

Mutual Bank is unable to meet the Federal Reserve Board's reserve requirements, so it must take out a loan from the Fed. In this scenario, Mutual Bank is said to have borrowed at the

Accepted Answer

A)   "reserve source."
B)   "discount door."
C)   "discount window."
D)   "reserve window."
E)   "reserve discount."F) A) and B)
G) All of the above

Question 14

Gerald lives in an apartment in Chicago. Every month, he must pay rent and utilities to remain in his apartment. As it pertains to the functions of money, this is an example of a(n)  ________ action.

Accepted Answer

A)   financing
B)   investing
C)   entertainment
D)   operating
E)   essentialF) C) and D)
G) C) and E)

Question 15

The Federal Reserve took all of the following actions during the most recent financial crisis between 2007 and 2008 EXCEPT it

Accepted Answer

A)   gave a directive to change the management of the banks that had to be bailed out.
B)   bought up troubled assets from banks.
C)   lent money at the discount window to nonbanks such as investment bankers and brokers.
D)   kept the interest rates low to stimulate the economy.
E)   entered into the financial markets by making markets in commercial paper and other securities where the markets had ceased to function.F) B) and E)
G) A) and E)

Question 16

With the passage of the Check Clearing for the 21st Century Act (Check 21 Act) , which of the following is now possible?

Accepted Answer

A)   Checks can be sent for free via a new overnight delivery service.
B)   Checks can be processed in less than a week.
C)   Checks can be processed in a day.
D)   Checks can be sent electronically, so banks can process them while they wait for the actual check to arrive for clearing.
E)   Checks have been replaced with an electronic form banks can fill out.F) B) and E)
G) C) and D)

Question 17

All of the following are major responsibilities of the Federal Reserve Board EXCEPT

Accepted Answer

A)   controlling the supply of money.
B)   providing short-term loans to businesses.
C)   regulating banks and other financial institutions.
D)   managing regional and national checking account procedures.
E)   supervising the federal deposit insurance programs of banks belonging to the Federal Reserve System.F) A) and E)
G) None of the above

Question 18

What characteristic of money is directly affected by the health of the economy?

Accepted Answer

A)   its function as a store of value
B)   its function as a medium of exchange
C)   its acceptability
D)   its portability
E)   its divisibilityF) C) and E)
G) A) and B)

Question 19

Aiden and Ellie recently got married and now they are ready to purchase their first home together. After finding the house they want to buy, they go to a savings and loan association to get a mortgage. What will happen if Aiden and Ellie are ever unable to make their mortgage payments?

Accepted Answer

A)   The savings and loan association will accept Aiden and Ellie's possessions, such as cars, appliances, and electronics, in lieu of payments.
B)   The savings and loan association has the right to repossess their house.
C)   The savings and loan association will give them discounts to help them pay their mortgage.
D)   The savings and loan association will waive their interest to make the mortgage payments more manageable.
E)   The savings and loan association will extend the time Aiden and Ellie have to make the payments.F) None of the above
G) All of the above

Question 20

A checking account is also called a demand deposit because

Accepted Answer

A)   depositors can demand a certain rate of interest on the account.
B)   retailers can demand that they be used instead of paper currency.
C)   it is the only type of account that demands regulation by the Federal Reserve.
D)   the Federal Reserve can demand a certain level of deposits for these accounts.
E)   funds may be withdrawn by its owner without advance notice.F) A) and B)
G) C) and D)

Exam 15: Money and the Financial System

The Federal Reserve took all of the following actions during the most recent financial crisis between 2007 and 2008 EXCEPT it

Correct AnswerverifiedShow Answer

The Federal Reserve Board's credit controls allows the Fed to

Correct AnswerverifiedShow Answer

Josh and Camilla want to remodel the kitchen in their home. They decide to take out a home equity loan that will allow them to borrow money against the appraised value of their home. Which type of financial institution would Josh and Camilla most likely go to for this type of loan?

Correct AnswerverifiedShow Answer

When Congress originally established insurance funds for banks, it did so to

Correct AnswerverifiedShow Answer

What characteristic of money is directly affected by the health of the economy?

Correct AnswerverifiedShow Answer

Noelle has taught dance classes at a large studio for several years. Recently, she decided to start her own dance studio. As a function of money, this scenario describes Noelle's desire for ________ actions.

Correct AnswerverifiedShow Answer

Mutual Bank is unable to meet the Federal Reserve Board's reserve requirements, so it must take out a loan from the Fed. In this scenario, Mutual Bank is said to have borrowed at the

Correct AnswerverifiedShow Answer

In reaction to the financial meltdown and severe recession between 2007 and 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. What does the full name of this act imply?

Correct AnswerverifiedShow Answer

A checking account is also called a demand deposit because

Correct AnswerverifiedShow Answer

During 2007-2008, which of the following contributed to the collapse of the financial markets?

Correct AnswerverifiedShow Answer

Aiden and Ellie recently got married and now they are ready to purchase their first home together. After finding the house they want to buy, they go to a savings and loan association to get a mortgage. What will happen if Aiden and Ellie are ever unable to make their mortgage payments?

Correct AnswerverifiedShow Answer

Gerald lives in an apartment in Chicago. Every month, he must pay rent and utilities to remain in his apartment. As it pertains to the functions of money, this is an example of a(n) ________ action.

Correct AnswerverifiedShow Answer

A company that matches investors and borrowers with loans between $2,000 and $35,000 are referred to as

Correct AnswerverifiedShow Answer

Anna is a high school senior who wants to buy a prom dress that costs $250. She postpones purchasing the dress and gets a weekend job at a restaurant to save money for it. After two months of saving, she is able to buy the dress. What characteristic of money does this scenario best relate to?

Correct AnswerverifiedShow Answer

All of the following are major responsibilities of the Federal Reserve Board EXCEPT

Correct AnswerverifiedShow Answer

Jonathan is a fifty-year-old construction-site foreman who invests money with a firm that, in turn, pools it with other investor dollars and invests the money in well-diversified securities, managed by an investment professional within the firm. In this scenario, Jonathan is investing in a(n)

Correct AnswerverifiedShow Answer

Rick owns and operates a small farm that produces vegetables and fruits. His friend Owen owns and operates a butcher shop that sells various kinds of meat. Rick often gives Owen vegetables and fruits in exchange for meat, and vice versa. This scenario best describes

Correct AnswerverifiedShow Answer

With the passage of the Check Clearing for the 21st Century Act (Check 21 Act) , which of the following is now possible?

Correct AnswerverifiedShow Answer

When early settlers needed to buy farming equipment and supplies, they often would use the milk, eggs, and crops their farms produced as currency. As it pertains to money, this scenario depicts

Correct AnswerverifiedShow Answer

U.S. money includes subtle colors in addition to the traditional green, as well as enhanced security features, such as a watermark, security thread, and color-shifting ink. What characteristic of money is being protected by these measures?

Correct AnswerverifiedShow Answer

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