Deck 13: Managing Financial Resources

Question 1

For money to be useful, it must be difficult to counterfeit.

Answer 1

True

Question 2

Bartering means trading something for something else that another party wants.

Answer 2

True

Question 3

The fact that people are willing to save money for future purposes describes which function of money _____.

A)bartering
B)medium of exchange
C)measure of value
D)store of value

Answer 3

D

Question 4

For financial transactions to occur, money must _____.

A)be manufactured
B)change hands
C)be saved
D)be privately held

Question 5

Savings banks are the most common financial institutions in the United States.

Question 6

Money serves all of the following basic functions _____.

A)medium of barter
B)medium of exchange
C)measure of value
D)store of value

Question 7

The government compiles two measures for the purpose of tracking the money supply: M-1 and M-2.Which of the following is included in the government's calculation of M-2?

A)Checking-account funds
B)Cash
C)Savings accounts
D)Time deposits greater than $100,000

Question 8

Checking accounts that pay given sums to "payees" are called order deposits.

Question 9

Under _____ systems, people trade goods and services directly for one another.

A)economic
B)trade
C)barter
D)medium

Question 10

_____ deposits are checking accounts that pay given sums to "payees" when they're ordered.

A)Order
B)Demand
C)Command
D)Payout

Question 11

Which of the following is the reason why money exchange is more efficient than barter?

A)Money isn't too heavy to carry.
B)Money is a more precise measure of value.
C)Money doesn't take up space allotted to goods.
D)Money has greater value than any goods.

Question 12

The FDIC regulates banks and insures deposits in member banks up to $250,000.

Question 13

For money to be useful, it must posses all of the following properties _____.

A)divisibility
B)portability
C)durability
D)tangibility

Question 14

_____ funds pay interest to investors who have pooled funds to make short-term loan to businesses and government bodies.

A)Demand
B)Commercial
C)Money market mutual
D)M-1

Question 15

What are the three basic functions of money?

Question 16

The government tracks the money supply by calculating _____, which includes the most liquid forms of money.

A)M-1
B)M-2
C)M-10
D)M-15

Question 17

If you're a farmer who needs help clearing his fields and has plenty of food to spare, you might enter into a _____ transaction with a laborer who has time to clear fields but not enough food.

A)sharecropping
B)barter
C)tenant farming
D)bargaining

Question 18

Money market mutual funds pay interest to investors who have pooled funds to make short-term loans to businesses and government bodies.

Question 19

Individual retirement accounts (IRAs) can accumulate money that's tax free until the investor retires.

Question 20

M-2 is a measure of the money supply that includes everything in M-1 plus near-cash.

Question 21

To bank at a(n) _____, you must be linked to a particular group.

A)credit union
B)insurance company
C)brokerage firm
D)mutual fund

Question 22

Because it's a nondepository institution, Community First Bank will probably never offer trust services.

Question 23

All of the following are depository institutions _____.

A)commercial banks
B)savings banks
C)credit unions
D)brokerage firms

Question 24

Credit unions are widely used because they're easier to deal with than banks.

Question 25

If a commercial bank in which funds you have deposited fails (goes out of business), the FDIC would give you back all of your money.

Question 26

The financial crisis that began in 2006-2007 in the banking industry as a result of the subprime mortgage crisis caused all of the following problems:

A)individuals and businesses had trouble getting loans.
B)consumer confidence remained strong.
C)many lost their jobs.
D)housing prices dropped.

Question 27

Thrift institutions were originally set up to encourage personal savings.

Question 28

Scenario-Based
Sherry LeBlanc has been a teller at Community First Bank for two years and anticipates a promotion to main teller within the next few months.She's worked hard at her job, knows her bank's financial products well, and interacts with customers effectively.Community First Bank has been in business for 38 years, provides traditional banking services, and enjoys a good reputation in the local area.
Sherry can offer customers checking accounts and savings accounts but probably not electronic banking.

Question 29

You work in customer service at a(n) _____, which is the most common type of financial institution in the U.S.

A)savings bank
B)commercial bank
C)insurance company
D)credit union

Question 30

The money multiplier allows banks to expand the money supply.

Question 31

Credit unions offer only limited services to their members, who must be linked to a particular group such as employees of the State of North Carolina.

Question 32

Which of the following occurred as a result of the subprime mortgage crisis?

A)American International Group (AIG), a giant insurance company, was on the brink of bankruptcy when the government stepped in and bailed it out with loans of $85 billion.
B)The Federal National Mortgage Association (Freddie Mac) was bought by Merrill Lynch.
C)Profits at most banks rose as people started saving more.
D)The government provided $15,000 to homeowners who could not make their mortgage payments and so foreclosures declined.

Question 33

Scenario-Based
Sherry LeBlanc has been a teller at Community First Bank for two years and anticipates a promotion to main teller within the next few months.She's worked hard at her job, knows her bank's financial products well, and interacts with customers effectively.Community First Bank has been in business for 38 years, provides traditional banking services, and enjoys a good reputation in the local area.
Sherry works at the most common type of financial institution in America.

Question 34

If Kent Pulowski wants to open a personal retirement account to save money tax free until his retirement, he should look into a(n) _____.

A)pension fund
B)individual retirement account (IRA)
C)money market account
D)mutual fund

Question 35

The _____ is the amount by which an initial bank deposit will expand the money supply.

A)money multiplier
B)money inflator
C)money magnifier
D)credit inflator

Question 36

_____ were originally set up to encourage personal savings and provide mortgages to local home buyers.

A)Commercial banks
B)Savings banks
C)Credit unions
D)Brokerage firms

Question 37

Finance companies can be characterized as deposit institutions because they provide traditional banking services.

Question 38

______ sell protection against losses incurred by illness, disability, death, and property damage.

A)Mutual funds
B)Brokerage firms
C)Credit unions
D)Insurance companies

Question 39

Because they don't accept deposits from individuals or provide traditional banking services, _____ are characterized as nondeposit institutions.

A)finance companies
B)money market funds
C)mutual fund companies
D)brokerage firms

Question 40

The _____ is a government agency that regulates banks and insures deposits in member banks up to $250,000.

A)FBI
B)IRA
C)FDIC
D)MDIC

Question 41

The rate that banks charge their best customers is called the maturity rate.

Question 42

What is a savings bank?

Question 43

The _____ rate is the rate of interest that the Fed charges member banks.

A)carryover
B)FDIC (Federal Deposit Insurance Corporation)
C)discount
D)operations

Question 44

If the Fed wants to decrease the money supply, it can _____.

A)sell bonds
B)buy bonds
C)sell treasury securities
D)raise the prime rate

Question 45

The rate of interest that the Fed charges member banks is called the market rate.

Question 46

The Fed performs all of the following functions :

A)processing the paperwork involved in buying and selling government securities.
B)collecting federal tax payments.
C)regulating state banks.
D)holding the U.S.Treasury's checking account.

Question 47

All of the following are among the Fed's three major goals _____.

A)price stability
B)sustainable economic growth
C)full employment
D)low inflation

Question 48

As a loan officer at a commercial bank, you must determine the _____ rate that you'll charge your best customers.

A)discount
B)federal funds
C)preferred
D)prime

Question 49

Coordinated by a board of _____, the Federal Reserve System consists of 12 districts, each with a member?owned Federal Reserve Bank.

A)regents
B)officers
C)trustees
D)governors

Question 50

Because of the money-multiplier effect, the Fed changes reserve requirements _____.

A)only rarely
B)often
C)every month
D)every six months

Question 51

The three major goals of the Fed are price stability, full employment, and income distribution.

Question 52

One of the actions that can be taken by the Fed is to raise or lower the inflation rate.

Question 53

Community First offers demand deposits.

Question 54

_____ operations are the Fed's main tool in controlling the money supply and influencing interest rates.

A)Open market
B)Multimarket
C)Mutual fund
D)Carryover

Question 55

The Fed does all of the following _____.

A)helps businesses obtain loans
B)prints currency
C)distributes money
D)destroys currency

Question 56

How do finance companies differ from insurance companies?

Question 57

The _____ rate is the interest rate paid by a Federal Reserve member bank when it borrows from another member bank to meet its reserve requirements.

A)discount
B)federal funds
C)open market
D)mutual funds

Question 58

Because it's a growing trend in the U.S., it's entirely possible that Sherry's bank will merge with a larger bank.

Question 59

Price stability is among the three major goals of the Federal Reserve System.

Question 60

In conducting open market operations, the Fed sells and purchases U.S.government bonds on the open market.

Question 61

If you want to start a small business and need a bank loan, your banker will want primarily to see your mission statement.

Question 62

What is the prime rate and how does it function?

Question 63

A financial plan shows calculations for the amount of funds that a company needs for a specified period.

Question 64

In the process of becoming a publicly-traded corporation, a company needs the help of a commercial bank.

Question 65

Which of the following is an approach used by the Fed to lessen the likelihood of inflation?

A)Lower the reserve requirement for banks so they can loan out more money.
B)Raise the discount rate charged to banks that borrow funds from the Fed.
C)Buy bonds on the open market to increase the amount of money banks have to lend.
D)Lower the federal funds rate charged to banks who want to borrow from other banks.

Question 66

Loans from family and friends are the most important source of funds for any new business.

Question 67

Cash-flow management means monitoring cash inflows and outflows to ensure that a company has sufficient but not excessive cash on hand.

Question 68

A financial manager determines when a company will repay the money it's borrowed.

Question 69

Amortization is the schedule by which you'll reduce the balance of your debt.

Question 70

Mary Matthews is creating a(n) _____ that calculates the amount of funds that her company needs for a specified period of time.

A)fiscal budget
B)financial statement
C)annual report
D)financial plan

Question 71

Your _____ schedule is the schedule by which you'll reduce the balance of your debt.

A)interest and depreciation
B)maturity
C)balance abatement
D)amortization

Question 72

When a family member loans money to start up a business, he or she should not insult the borrower by drawing up a formal loan agreement.

Question 73

Angels are usually wealthy individuals willing to invest in start-up ventures that they believe will succeed.

Question 74

Capital credit is extended to a business by its suppliers.

Question 75

Collateral is something that you pledge in order to guarantee repayment of a loan.

Question 76

You're the president of a savings bank that just took in a deposit of $100.Your bank's reserve requirement is 10 percent.Using the concept of the money multiplier, the deposit will generate how much in loans?

A)$90
B)$1,000
C)$900
D)$10

Question 77

New businesses are generally financed by _____.

A)owners' personal assets
B)loans from family and friends
C)bank loans
D)all of these

Question 78

The first step in becoming a publicly-traded corporation is to introduce an initial public offering (IPO).

Question 79

If Jason Freidman succeeds in getting an unsecured bank loan, he won't be required to put up collateral.

Question 80

Explain the four ways in which the Fed functions as the U.S.government's banker.