Question 1

What is a reserve requirement?

Accepted Answer

The reserve requirement is the

Question 2

Subprime loans have higher interest rates than conventional loans. Subprime loans are designed for borrowers with low credit scores who would not qualify for conventional loans. The borrower pays a higher rate to compensate the lender for the greater risk of a default. Subprime loans typically have adjustable rates, meaning that the interest rate can change over the life of the loan. Borrowers who take out adjustable subprime loans usually try to keep the rate as low as possible at the start of the loan, even when doing so would lead to higher payments over the entire life of the loan. After a large number of people defaulted on their subprime loans, research revealed that the majority of people who took out subprime loans could have qualified for conventional loans. Taking out a subprime loan to buy a house is most likely to be a reasonable financial decision when which of the following is true?

Accepted Answer

A)  Qualifying for a conventional loan is impossible. 
B)  Owning a home is an important life goal for the borrower. 
C)  Adjustable rates are likely to be higher than fixed rates. 
D)  The borrower reasonably expects to have greater financial means in the near future. 
E)  The previous owner of the house took out a subprime loan. 
A)  Qualifying for a conventional loan is impossible. 
B)  Owning a home is an important life goal for the borrower. 
C)  Adjustable rates are likely to be higher than fixed rates. 
D)  The borrower reasonably expects to have greater financial means in the near future. 
E)  The previous owner of the house took out a subprime loan.

Question 3

According to the Big Mac index

Accepted Answer

A)  Big Mac's must be priced higher in China than in Canada. 
B)  the price of a Big Mac is used to determine if a given currency is overvalued or undervalued. 
C)  Big Mac's are better than Mom's homemade hamburgers. 
D)  Big Mac's are always cheaper in France than they are in Canada. 
E)  Big Mac's are priced the same all over the world. 
A)  Big Mac's must be priced higher in China than in Canada. 
B)  the price of a Big Mac is used to determine if a given currency is overvalued or undervalued. 
C)  Big Mac's are better than Mom's homemade hamburgers. 
D)  Big Mac's are always cheaper in France than they are in Canada. 
E)  Big Mac's are priced the same all over the world.

Question 4

All of the following are criteria for something to be considered as money except

Accepted Answer

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

Question 5

Which of the following provides cooperative savings and lending services to its members?

Accepted Answer

A)  Schedule B bank 
B)  Trustee 
C)  Credit union 
D)  Trust company 
E)  Pension fund 
A)  Schedule B bank 
B)  Trustee 
C)  Credit union 
D)  Trust company 
E)  Pension fund

Question 6

The M-2 money supply includes everything that is in the M-1 money supply.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that, as a small business, you decide to buy a new copying machine. Since you cannot afford to pay cash, you finance the machine over 12 months. The copy machine itself will serve as loan collateral. The major source of credit is a(n)

Accepted Answer

A)  investment company. 
B)  sales finance company. 
C)  venture capital firm. 
D)  consumer finance company. 
E)  factoring company. 
A)  investment company. 
B)  sales finance company. 
C)  venture capital firm. 
D)  consumer finance company. 
E)  factoring company.

Question 8

What does it mean when we say that money functions as a medium of exchange, as a store of value, and as a unit of account?

Accepted Answer

Money functions as a medium of exchange

Question 9

Describe the kinds of businesses that make up "pillar #2" of the Canadian financial system.

Accepted Answer

A trust company safeguards property-fund

Question 10

The prime rate of interest is the rate charged

Accepted Answer

A)  on time deposits. 
B)  on consumer installment loans. 
C)  to major business customers. 
D)  on mortgages. 
E)  to the most risky borrowers. 
A)  on time deposits. 
B)  on consumer installment loans. 
C)  to major business customers. 
D)  on mortgages. 
E)  to the most risky borrowers.

Question 11

Describe the functions of the Bank of Canada and describe the tools it uses to control the money supply.

Accepted Answer

The Bank of Canada manages the Canadian

Question 12

What is a letter of credit?

Accepted Answer

A promise by the ban

Question 13

The M-1 money supply account measures only the most liquid forms of money, such as cash.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

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. 
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 15

The interest rate available to a bank's most creditworthy customers is the

Accepted Answer

A)  discount rate. 
B)  optimal rate. 
C)  key rate. 
D)  funds rate. 
E)  prime rate. 
A)  discount rate. 
B)  optimal rate. 
C)  key rate. 
D)  funds rate. 
E)  prime rate.

Question 16

Which of the following best describes the stability characteristic of money?

Accepted Answer

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. 
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.

Question 17

Which of the following might the Bank of Canada do to increase the money supply?

Accepted Answer

A)  Sell government securities 
B)  Increase the bank rate 
C)  Impose a new tax 
D)  Buy government securities 
E)  Increase the reserve rate 
A)  Sell government securities 
B)  Increase the bank rate 
C)  Impose a new tax 
D)  Buy government securities 
E)  Increase the reserve rate

Question 18

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

Accepted Answer

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

Question 19

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

Accepted Answer

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

Question 20

M-1 includes M-2 plus currency, demand deposits, and other chequable deposits.

Accepted Answer

A) True 
 B)False

What is a reserve requirement?

According to the Big Mac index

All of the following are criteria for something to be considered as money except

Which of the following provides cooperative savings and lending services to its members?

The M-2 money supply includes everything that is in the M-1 money supply.

Suppose that, as a small business, you decide to buy a new copying machine. Since you cannot afford to pay cash, you finance the machine over 12 months. The copy machine itself will serve as loan collateral. The major source of credit is a(n)

What does it mean when we say that money functions as a medium of exchange, as a store of value, and as a unit of account?

Describe the kinds of businesses that make up "pillar #2" of the Canadian financial system.

The prime rate of interest is the rate charged

Describe the functions of the Bank of Canada and describe the tools it uses to control the money supply.

What is a letter of credit?

The M-1 money supply account measures only the most liquid forms of money, such as cash.

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

The interest rate available to a bank's most creditworthy customers is the

Which of the following best describes the stability characteristic of money?

Which of the following might the Bank of Canada do to increase the money supply?

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

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

M-1 includes M-2 plus currency, demand deposits, and other chequable deposits.

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Accounting

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Finacial Decisions and Risk Management

Filters

Exam 14: Money and Banking

What is a reserve requirement?

According to the Big Mac index

All of the following are criteria for something to be considered as money except

Which of the following provides cooperative savings and lending services to its members?

The M-2 money supply includes everything that is in the M-1 money supply.

Suppose that, as a small business, you decide to buy a new copying machine. Since you cannot afford to pay cash, you finance the machine over 12 months. The copy machine itself will serve as loan collateral. The major source of credit is a(n)

What does it mean when we say that money functions as a medium of exchange, as a store of value, and as a unit of account?

Describe the kinds of businesses that make up "pillar #2" of the Canadian financial system.

The prime rate of interest is the rate charged

Describe the functions of the Bank of Canada and describe the tools it uses to control the money supply.

What is a letter of credit?

The M-1 money supply account measures only the most liquid forms of money, such as cash.

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

The interest rate available to a bank's most creditworthy customers is the

Which of the following best describes the stability characteristic of money?

Which of the following might the Bank of Canada do to increase the money supply?

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

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

M-1 includes M-2 plus currency, demand deposits, and other chequable deposits.

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Accounting

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Finacial Decisions and Risk Management

Filters