Question 1

The typical dollar bill has a life expectancy of about three years.

Accepted Answer

A) True 
 B)False

Question 2

Of the following, which is false about the "stress" tests that were instituted and conducted by the Federal Reserve and other federal agencies?

Accepted Answer

A)  The tests were conducted in spring of 2009. 
B)  The tests measured how well banks could weather the economic crisis. 
C)  The tests were conducted with the 19 largest U.S. banks. 
D)  The banks that failed were provided non-recourse loans to help secure the banks' survival. 
E)  Banks that failed the test were required to obtain new capital through stocks and bonds or accept federal government funds. 
A)  The tests were conducted in spring of 2009. 
B)  The tests measured how well banks could weather the economic crisis. 
C)  The tests were conducted with the 19 largest U.S. banks. 
D)  The banks that failed were provided non-recourse loans to help secure the banks' survival. 
E)  Banks that failed the test were required to obtain new capital through stocks and bonds or accept federal government funds.

Question 3

All of the following are responsibilities of the Federal Reserve System except

Accepted Answer

A)  serving as the government bank. 
B)  inspecting currency and destroying worn currency. 
C)  enforcing the Truth-in-Lending Act. 
D)  clearing checks and electronic transfers. 
E)  negotiating loans for the government. 
A)  serving as the government bank. 
B)  inspecting currency and destroying worn currency. 
C)  enforcing the Truth-in-Lending Act. 
D)  clearing checks and electronic transfers. 
E)  negotiating loans for the government.

Question 4

The Senate confirms the appointment of each member of the board of governors for a term of ____ year(s).

Accepted Answer

A)  one 
B)  five 
C)  eight 
D)  ten 
E)  fourteen 
A)  one 
B)  five 
C)  eight 
D)  ten 
E)  fourteen

Question 5

The Federal Reserve System was organized in

Accepted Answer

A)  1893. 
B)  1933. 
C)  1913. 
D)  1943. 
E)  1981. 
A)  1893. 
B)  1933. 
C)  1913. 
D)  1943. 
E)  1981.

Question 6

Which of the following is not considered a goal of new government banking and financial organization by the Obama administration?

Accepted Answer

A)  Provide economic growth in coordination with full employment. 
B)  Provide a foundation for stable economic growth. 
C)  Require financial institutions to pay back bailout funds. 
D)  Curb high-risk investment strategies. 
E)  Protect families from unfair, abusive financial and banking practices. 
A)  Provide economic growth in coordination with full employment. 
B)  Provide a foundation for stable economic growth. 
C)  Require financial institutions to pay back bailout funds. 
D)  Curb high-risk investment strategies. 
E)  Protect families from unfair, abusive financial and banking practices.

Question 7

Maya Michey graduated from college and is seeking employment in the banking industry. She believes she has what it takes to be successful because she

Accepted Answer

A)  is driven to earn a big salary. 
B)  is looking for an easy job. 
C)  is honest and likes to interact with people. 
D)  doesn't want to work long hours. 
E)  knows a lot of employees at local banks. 
A)  is driven to earn a big salary. 
B)  is looking for an easy job. 
C)  is honest and likes to interact with people. 
D)  doesn't want to work long hours. 
E)  knows a lot of employees at local banks.

Question 8

When Clarissa Nettles went to the grocery store, she wrote out a check to pay for her purchases. The clerk processed the check electronically and gave her voided check back. The store is using a(n) ____ to process Clarissa's payment.

Accepted Answer

A)  automated clearinghouse 
B)  electronic check conversion 
C)  magic check reader 
D)  qualified payment system 
E)  direct deposit 
A)  automated clearinghouse 
B)  electronic check conversion 
C)  magic check reader 
D)  qualified payment system 
E)  direct deposit

Question 9

A single standard that is used to assign value to or compare values of products or services is called

Accepted Answer

A)  a store of value. 
B)  barter. 
C)  a medium of exchange. 
D)  capital. 
E)  a measure of value. 
A)  a store of value. 
B)  barter. 
C)  a medium of exchange. 
D)  capital. 
E)  a measure of value.

Question 10

Marty obtained a three-year loan at 7.5 percent interest to buy a new BMW and used the car as collateral for the loan. After two years, the Stocker Finance Company repossessed Marty's car because

Accepted Answer

A)  he took out a short-term loan. 
B)  the company wanted to resell the car at a higher interest rate. 
C)  he failed to repay the loan according to the loan terms. 
D)  he paid off the loan. 
E)  he never signed the original loan agreement. 
A)  he took out a short-term loan. 
B)  the company wanted to resell the car at a higher interest rate. 
C)  he failed to repay the loan according to the loan terms. 
D)  he paid off the loan. 
E)  he never signed the original loan agreement.

Question 11

The business that collects premiums and then provides long-term financing for large real estate projects is a(n)

Accepted Answer

A)  commercial bank. 
B)  credit union. 
C)  mutual savings bank. 
D)  Federal Reserve Bank. 
E)  insurance company. 
A)  commercial bank. 
B)  credit union. 
C)  mutual savings bank. 
D)  Federal Reserve Bank. 
E)  insurance company.

Question 12

Which of the following would not be included in the M₁ definition of money?

Accepted Answer

A)  Coins 
B)  Paper currency 
C)  Small-denomination CDs 
D)  Travelers checks 
E)  Demand deposits 
A)  Coins 
B)  Paper currency 
C)  Small-denomination CDs 
D)  Travelers checks 
E)  Demand deposits

Question 13

Vince is saving to buy his first car. The Mini Cooper he wants is $28,000 right now, but it will take at least a year for him to accumulate the down payment. He also knows that although money is a store of value, he will probably need more than $28,000 to buy the car next year because of

Accepted Answer

A)  bartering. 
B)  deflation. 
C)  low interest rates. 
D)  inflation. 
E)  recession. 
A)  bartering. 
B)  deflation. 
C)  low interest rates. 
D)  inflation. 
E)  recession.

Question 14

XYZ Bank has total time deposits of $100 million. The Federal Reserve requires this bank to maintain 10 percent of its deposits. In this situation, the bank must maintain

Accepted Answer

A)  $0. 
B)  $1,200,000. 
C)  $10,000,000. 
D)  $24,000,000. 
E)  $100,000,000. 
A)  $0. 
B)  $1,200,000. 
C)  $10,000,000. 
D)  $24,000,000. 
E)  $100,000,000.

Question 15

Which of the following statements is true?

Accepted Answer

A)  The process of deposit expansion decreases the amount of money a bank can lend to borrowers. 
B)  The process of deposit expansion is forbidden by the Federal Reserve. 
C)  The Federal Reserve uses deposit expansion to counteract the effects of inflation. 
D)  The Federal Reserve uses deposit expansion to slow down the growth rate of the economy. 
E)  Deposit expansion can increase the amount of money a bank can lend to borrowers. 
A)  The process of deposit expansion decreases the amount of money a bank can lend to borrowers. 
B)  The process of deposit expansion is forbidden by the Federal Reserve. 
C)  The Federal Reserve uses deposit expansion to counteract the effects of inflation. 
D)  The Federal Reserve uses deposit expansion to slow down the growth rate of the economy. 
E)  Deposit expansion can increase the amount of money a bank can lend to borrowers.

Question 16

Each member of the board of governors of the Federal Reserve System is appointed by the president and confirmed by the Senate.

Accepted Answer

A) True 
 B)False

Question 17

When the Fed lowers the discount rate, money

Accepted Answer

A)  is as easy to obtain as before the action. 
B)  is easier to obtain. 
C)  is harder to obtain. 
D)  cannot be obtained. 
E)  is not as easy to obtain as before. 
A)  is as easy to obtain as before the action. 
B)  is easier to obtain. 
C)  is harder to obtain. 
D)  cannot be obtained. 
E)  is not as easy to obtain as before.

Question 18

A financial institution that is owned by its depositors is called a(n)

Accepted Answer

A)  common stock bank. 
B)  mutual savings bank. 
C)  insurance company. 
D)  savings and loan association. 
E)  national bank. 
A)  common stock bank. 
B)  mutual savings bank. 
C)  insurance company. 
D)  savings and loan association. 
E)  national bank.

Question 19

Most checks can be cleared through the Federal Reserve System in less than one day.

Accepted Answer

A) True 
 B)False

Question 20

The interest rate that the Federal Reserve System charges for loans to member banks is called the

Accepted Answer

A)  reserve requirement. 
B)  open-market rate. 
C)  margin requirement. 
D)  secured rate. 
E)  discount rate. 
A)  reserve requirement. 
B)  open-market rate. 
C)  margin requirement. 
D)  secured rate. 
E)  discount rate.

Exam 18: Understanding Money, Banking, and Credit

The typical dollar bill has a life expectancy of about three years.

Of the following, which is false about the "stress" tests that were instituted and conducted by the Federal Reserve and other federal agencies?

All of the following are responsibilities of the Federal Reserve System except

The Senate confirms the appointment of each member of the board of governors for a term of ____ year(s).

The Federal Reserve System was organized in

Which of the following is not considered a goal of new government banking and financial organization by the Obama administration?

Maya Michey graduated from college and is seeking employment in the banking industry. She believes she has what it takes to be successful because she

When Clarissa Nettles went to the grocery store, she wrote out a check to pay for her purchases. The clerk processed the check electronically and gave her voided check back. The store is using a(n) ____ to process Clarissa's payment.

A single standard that is used to assign value to or compare values of products or services is called

Marty obtained a three-year loan at 7.5 percent interest to buy a new BMW and used the car as collateral for the loan. After two years, the Stocker Finance Company repossessed Marty's car because

The business that collects premiums and then provides long-term financing for large real estate projects is a(n)

Which of the following would not be included in the M₁ definition of money?

Vince is saving to buy his first car. The Mini Cooper he wants is $28,000 right now, but it will take at least a year for him to accumulate the down payment. He also knows that although money is a store of value, he will probably need more than $28,000 to buy the car next year because of

XYZ Bank has total time deposits of $100 million. The Federal Reserve requires this bank to maintain 10 percent of its deposits. In this situation, the bank must maintain

Which of the following statements is true?

Each member of the board of governors of the Federal Reserve System is appointed by the president and confirmed by the Senate.

When the Fed lowers the discount rate, money

A financial institution that is owned by its depositors is called a(n)

Most checks can be cleared through the Federal Reserve System in less than one day.

The interest rate that the Federal Reserve System charges for loans to member banks is called the

Exploring the World of Business and Economics

A: Being Ethical and Socially Responsible

B: Being Ethical and Socially Responsible

A: Exploring Global Business

B: Exploring Global Business

Choosing a Form of Business Ownership

Small Business, Entrepreneurship, and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating and Satisfying Employees and Teams

Enhancing Union-Management Relations

Building Customer Relationships Through Effective Marketing

A: Creating and Pricing Products That Satisfy Customers

B: Creating and Pricing Products That Satisfy Customers

Wholesaling, Retailing, and Physical Distribution

Developing Integrated Marketing Communications

Social Media, E-Business, and Accounting

Using Management and Accounting Information

Mastering Financial Management

A: Understanding Personal Finances and Investments

B: Understanding Personal Finances and Investments

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