Question 1

What is commercial paper?

Accepted Answer

A)  A specific amount on deposit in a checking account that is owned by corporations 
B)  A synonym for near-monies 
C)  Interest-bearing bonds offered by large corporations 
D)  Long-term bonds issued by only the largest U.S. corporations 
E)  Short-term promissory notes issued by large corporations 
A)  A specific amount on deposit in a checking account that is owned by corporations 
B)  A synonym for near-monies 
C)  Interest-bearing bonds offered by large corporations 
D)  Long-term bonds issued by only the largest U.S. corporations 
E)  Short-term promissory notes issued by large corporations

Question 2

Brian can easily carry $100 in his wallet because money is

Accepted Answer

A)  the same as credit cards. 
B)  divisible. 
C)  stable. 
D)  portable. 
E)  durable. 
A)  the same as credit cards. 
B)  divisible. 
C)  stable. 
D)  portable. 
E)  durable.

Question 3

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. Ken was concerned about the method used by the Federal Reserve System to control the money supply. He believed this would result in the bank having less money to lend to customers. Which of the following methods refers to Ken's concern?

Accepted Answer

A)  Increase the discount rate. 
B)  Decrease the reserve requirement. 
C)  Sell government securities. 
D)  Buy government securities. 
E)  Decrease the discount rate. 
A)  Increase the discount rate. 
B)  Decrease the reserve requirement. 
C)  Sell government securities. 
D)  Buy government securities. 
E)  Decrease the discount rate.

Question 4

Money serves as a measure of value when it is used as a yardstick to compare values of products, services, or resources.

Accepted Answer

A) True 
 B)False

Question 5

Collateral is more common with long-term loans than with short-term loans.

Accepted Answer

A) True 
 B)False

Question 6

Credit unions generally pay higher interest to depositors while providing loans at lower cost than commercial banks.

Accepted Answer

A) True 
 B)False

Question 7

With regard to FDIC deposit insurance, deposits maintained in different categories of legal ownership are insured separately.

Accepted Answer

A) True 
 B)False

Question 8

Immediate purchasing power that is exchanged for a promise to pay at a later date is called

Accepted Answer

A)  collateral. 
B)  purchasing power. 
C)  trust creation. 
D)  money value. 
E)  credit. 
A)  collateral. 
B)  purchasing power. 
C)  trust creation. 
D)  money value. 
E)  credit.

Question 9

When the Fed buys and sells securities, the goal is to

Accepted Answer

A)  sell as many 30-year government securities as possible. 
B)  increase or decrease the federal funds rate. 
C)  reduce the national debt. 
D)  encourage businesses to borrow more money and hire more employees. 
E)  reduce taxes and encourage government spending. 
A)  sell as many 30-year government securities as possible. 
B)  increase or decrease the federal funds rate. 
C)  reduce the national debt. 
D)  encourage businesses to borrow more money and hire more employees. 
E)  reduce taxes and encourage government spending.

Question 10

To protect consumers in case the bank makes an error or the customer's account information is stolen, Congress passed the

Accepted Answer

A)  Truth-in-Banking Act. 
B)  Banking Regulation No. 204. 
C)  Security Protection Act. 
D)  Electronic Funds Transfer Act. 
E)  Financial Securities Act. 
A)  Truth-in-Banking Act. 
B)  Banking Regulation No. 204. 
C)  Security Protection Act. 
D)  Electronic Funds Transfer Act. 
E)  Financial Securities Act.

Question 11

The seven members of the Federal Reserve System are

Accepted Answer

A)  elected in a general election. 
B)  appointed by the Senate. 
C)  appointed by the president. 
D)  employees of the U.S. Treasury Department. 
E)  appointed by the House of Representatives. 
A)  elected in a general election. 
B)  appointed by the Senate. 
C)  appointed by the president. 
D)  employees of the U.S. Treasury Department. 
E)  appointed by the House of Representatives.

Question 12

The ____ requires lenders to clearly state the annual percentage rate and total finance charge for a consumer loan.

Accepted Answer

A)  Equal Employment Opportunity Act 
B)  Equal Pay Act 
C)  Truth-in-Lending Act 
D)  Civil Rights Act 
E)  Fair Credit Reporting Act 
A)  Equal Employment Opportunity Act 
B)  Equal Pay Act 
C)  Truth-in-Lending Act 
D)  Civil Rights Act 
E)  Fair Credit Reporting Act

Question 13

J Crew is concerned that it will need a significant amount of money to cover an upcoming shortfall of cash. Which is the best way to ensure that J Crew will be able to quickly get the money it needs?

Accepted Answer

A)  Line of credit 
B)  Short-term business loan 
C)  Long-term business loan 
D)  Revolving credit agreement 
E)  Debit card 
A)  Line of credit 
B)  Short-term business loan 
C)  Long-term business loan 
D)  Revolving credit agreement 
E)  Debit card

Question 14

Your friend Elizabeth says that all the Fed does is lower or raise interest rates. You explain that the Fed's actual mission is to

Accepted Answer

A)  maintain an economically healthy and financially sound business environment. 
B)  set the rules and regulations with which all banks are required to comply. 
C)  prevent a recession at all costs. 
D)  manipulate the market through the regulation of reserve requirements. 
E)  buy and sell government bonds as part of open-market operations. 
A)  maintain an economically healthy and financially sound business environment. 
B)  set the rules and regulations with which all banks are required to comply. 
C)  prevent a recession at all costs. 
D)  manipulate the market through the regulation of reserve requirements. 
E)  buy and sell government bonds as part of open-market operations.

Question 15

A machine that provides almost any service a human teller can provide is called a(n)

Accepted Answer

A)  ATM. 
B)  EFT. 
C)  ACH. 
D)  POS. 
E)  FRS. 
A)  ATM. 
B)  EFT. 
C)  ACH. 
D)  POS. 
E)  FRS.

Question 16

The M₁ supply of money consists of currency, demand deposits, travelers checks, and time deposits.

Accepted Answer

A) True 
 B)False

Question 17

In many stores in Canada, U.S. currency is accepted for payment because the retailers know that their suppliers and other customers will also accept it. In this example, money serves as a

Accepted Answer

A)  medium of exchange. 
B)  measure of exchange. 
C)  store of value. 
D)  foreign exchange currency. 
E)  measure of value. 
A)  medium of exchange. 
B)  measure of exchange. 
C)  store of value. 
D)  foreign exchange currency. 
E)  measure of value.

Question 18

Demand deposits are called near-monies.

Accepted Answer

A) True 
 B)False

Question 19

Commercial paper is a short-term promissory note issued by large corporations.

Accepted Answer

A) True 
 B)False

Question 20

A short-term loan is usually repaid within ____ year(s) or less.

Accepted Answer

A)  seven 
B)  three 
C)  one 
D)  five 
E)  ten 
A)  seven 
B)  three 
C)  one 
D)  five 
E)  ten

Exam 18: Understanding Money, Banking, and Credit

What is commercial paper?

Brian can easily carry $100 in his wallet because money is

Money serves as a measure of value when it is used as a yardstick to compare values of products, services, or resources.

Collateral is more common with long-term loans than with short-term loans.

Credit unions generally pay higher interest to depositors while providing loans at lower cost than commercial banks.

With regard to FDIC deposit insurance, deposits maintained in different categories of legal ownership are insured separately.

Immediate purchasing power that is exchanged for a promise to pay at a later date is called

When the Fed buys and sells securities, the goal is to

To protect consumers in case the bank makes an error or the customer's account information is stolen, Congress passed the

The seven members of the Federal Reserve System are

The ____ requires lenders to clearly state the annual percentage rate and total finance charge for a consumer loan.

J Crew is concerned that it will need a significant amount of money to cover an upcoming shortfall of cash. Which is the best way to ensure that J Crew will be able to quickly get the money it needs?

Your friend Elizabeth says that all the Fed does is lower or raise interest rates. You explain that the Fed's actual mission is to

A machine that provides almost any service a human teller can provide is called a(n)

The M₁ supply of money consists of currency, demand deposits, travelers checks, and time deposits.

In many stores in Canada, U.S. currency is accepted for payment because the retailers know that their suppliers and other customers will also accept it. In this example, money serves as a

Demand deposits are called near-monies.

Commercial paper is a short-term promissory note issued by large corporations.

A short-term loan is usually repaid within ____ year(s) or less.

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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