Question 1

It will cost the merchant between 5 and 12 percent to process a credit-card transaction.

Accepted Answer

A) True 
 B)False

Question 2

A guaranteed line of credit is called a

Accepted Answer

A)  short-term loan. 
B)  secured loan. 
C)  line-of-credit plus. 
D)  demand deposit. 
E)  revolving credit agreement. 
A)  short-term loan. 
B)  secured loan. 
C)  line-of-credit plus. 
D)  demand deposit. 
E)  revolving credit agreement.

Question 3

Neal has $25,000 invested in a money-market mutual fund. This type of fund is an example of

Accepted Answer

A)  near-monies. 
B)  a demand deposit. 
C)  M₃. 
D)  a checking account. 
E)  an insurance policy. 
A)  near-monies. 
B)  a demand deposit. 
C)  M₃. 
D)  a checking account. 
E)  an insurance policy.

Question 4

Dorothy Richards has a certificate of deposit for $40,000 at a local bank. This $40,000 would be included in

Accepted Answer

A)  M₁. 
B)  M₂. 
C)  M₃. 
D)  M₁ and M₂. 
E)  M₁, M₂, and M₃. 
A)  M₁. 
B)  M₂. 
C)  M₃. 
D)  M₁ and M₂. 
E)  M₁, M₂, and M₃.

Question 5

While most people believe the federal funds rate is determined by the open market, it is actually established when the Federal Reserve Board meets each month.

Accepted Answer

A) True 
 B)False

Question 6

How many branch banks are in the Federal Reserve System?

Accepted Answer

A)  Five 
B)  Seven 
C)  Twelve 
D)  Fourteen 
E)  Twenty-four 
A)  Five 
B)  Seven 
C)  Twelve 
D)  Fourteen 
E)  Twenty-four

Question 7

If a subcultural group in Africa started its own country, it should not use tissue paper to print currency because money should have

Accepted Answer

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

Question 8

Today millions of Americans use credit cards. Why has this form of payment become so popular? What do you think are the dangers associated with using credit cards?

Accepted Answer

Credit cards have become popular for sev

Question 9

M&B Bank
Ken is a senior manager at M&B Bank. Initially, he started as a front counter worker and slowly progressed up the career ladder. In his role as a senior manager, Ken is keeping a keen eye on the industry, the Federal Reserve System, and the bank's competitors. Ken's previous boss did not do that well, and as a result the bank had suffered.
Several employees have pointed out that many businesses are not aware of the procedures for or a systematic way to evaluate the creditworthiness of their customers, collect past-due payments from customers, and protect their businesses from such losses. Based on feedback from several employees, M&B has decided to offer credit-counseling workshops for individuals and small businesses.
-Refer to M&B Bank. While offering the credit-counseling workshops, the facilitator lists the five Cs of credit. Which of the following refers to the borrower's attitude toward credit obligations?

Accepted Answer

A)  Capacity 
B)  Character 
C)  Collateral 
D)  Capital 
E)  Conditions 
A)  Capacity 
B)  Character 
C)  Collateral 
D)  Capital 
E)  Conditions

Question 10

Performing financial transactions through a computer terminal or telephone hookup is referred to as an EFT system.

Accepted Answer

A) True 
 B)False

Question 11

Deposits in a single account at a credit union are insured for

Accepted Answer

A)  $250,000. 
B)  $125,000. 
C)  $75,000. 
D)  $50,000. 
E)  $25,000. 
A)  $250,000. 
B)  $125,000. 
C)  $75,000. 
D)  $50,000. 
E)  $25,000.

Question 12

____ banks are chartered by the U.S. Comptroller of the Currency.

Accepted Answer

A)  U.S. 
B)  State 
C)  National 
D)  City 
E)  Commercial 
A)  U.S. 
B)  State 
C)  National 
D)  City 
E)  Commercial

Question 13

M₁ and M₂ are both measures of

Accepted Answer

A)  demand deposits. 
B)  gross domestic product. 
C)  reserve requirement levels. 
D)  the supply of money. 
E)  inflation. 
A)  demand deposits. 
B)  gross domestic product. 
C)  reserve requirement levels. 
D)  the supply of money. 
E)  inflation.

Question 14

EFT stands for

Accepted Answer

A)  efficient financial transaction. 
B)  electronic teller transfer. 
C)  electronic financial transaction. 
D)  electronic funds transfer. 
E)  effective funds transfer. 
A)  efficient financial transaction. 
B)  electronic teller transfer. 
C)  electronic financial transaction. 
D)  electronic funds transfer. 
E)  effective funds transfer.

Question 15

A system of exchange in which goods and services are traded directly for other goods and services is called a(n) ____ system.

Accepted Answer

A)  monetary 
B)  barter 
C)  exchange 
D)  mercantile 
E)  trading 
A)  monetary 
B)  barter 
C)  exchange 
D)  mercantile 
E)  trading

Question 16

In order to purchase a new sweater, Mike Martin pulled his bank card through a magnetic card reader. He is using a(n)

Accepted Answer

A)  automated teller machine. 
B)  automated clearinghouse. 
C)  bill payment by telephone. 
D)  point-of-sale terminal. 
E)  Super NOW teller machine. 
A)  automated teller machine. 
B)  automated clearinghouse. 
C)  bill payment by telephone. 
D)  point-of-sale terminal. 
E)  Super NOW teller machine.

Question 17

Kyle uses a local financial institution for his banking needs such as a checking and savings account. When he asks the manager what the money he has deposited is used for, the manager explains that the institution deals primarily with consumer loans and home mortgage loans. Anyone can open an account at this institution. This describes a

Accepted Answer

A)  commercial mutual bank. 
B)  mutual funds bank. 
C)  credit union. 
D)  savings and loan association. 
E)  national bank. 
A)  commercial mutual bank. 
B)  mutual funds bank. 
C)  credit union. 
D)  savings and loan association. 
E)  national bank.

Question 18

Increasing the reserve requirement is a powerful ____ weapon that reduces the overall supply of money.

Accepted Answer

A)  depression 
B)  anti-government 
C)  inflationary 
D)  anti-inflation 
E)  recessionary 
A)  depression 
B)  anti-government 
C)  inflationary 
D)  anti-inflation 
E)  recessionary

Question 19

Amounts held on deposit in checking accounts are

Accepted Answer

A)  demand deposits. 
B)  the M₂ supply of money. 
C)  time deposits. 
D)  near-monies. 
E)  transfer deposits. 
A)  demand deposits. 
B)  the M₂ supply of money. 
C)  time deposits. 
D)  near-monies. 
E)  transfer deposits.

Question 20

The economy in the United States has been lagging and is in danger of falling into a recession or even a depression. Based on historical actions, which of the following is the Fed most likely to do as a primary means to control the economy?

Accepted Answer

A)  Lower the reserve requirement. 
B)  Raise the discount rate. 
C)  Buy government securities. 
D)  Lower the prime rate. 
E)  Sell government securities. 
A)  Lower the reserve requirement. 
B)  Raise the discount rate. 
C)  Buy government securities. 
D)  Lower the prime rate. 
E)  Sell government securities.

Exam 18: Understanding Money, Banking, and Credit

It will cost the merchant between 5 and 12 percent to process a credit-card transaction.

A guaranteed line of credit is called a

Neal has $25,000 invested in a money-market mutual fund. This type of fund is an example of

Dorothy Richards has a certificate of deposit for $40,000 at a local bank. This $40,000 would be included in

While most people believe the federal funds rate is determined by the open market, it is actually established when the Federal Reserve Board meets each month.

How many branch banks are in the Federal Reserve System?

If a subcultural group in Africa started its own country, it should not use tissue paper to print currency because money should have

Today millions of Americans use credit cards. Why has this form of payment become so popular? What do you think are the dangers associated with using credit cards?

Performing financial transactions through a computer terminal or telephone hookup is referred to as an EFT system.

Deposits in a single account at a credit union are insured for

____ banks are chartered by the U.S. Comptroller of the Currency.

M₁ and M₂ are both measures of

EFT stands for

A system of exchange in which goods and services are traded directly for other goods and services is called a(n) ____ system.

In order to purchase a new sweater, Mike Martin pulled his bank card through a magnetic card reader. He is using a(n)

Increasing the reserve requirement is a powerful ____ weapon that reduces the overall supply of money.

Amounts held on deposit in checking accounts are

The economy in the United States has been lagging and is in danger of falling into a recession or even a depression. Based on historical actions, which of the following is the Fed most likely to do as a primary means to control the economy?

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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