Question 1

Malik runs a fun center that offers go-karts, mini-golf, and more. He is low on money and offers his soda supplier free tickets to the fun center in exchange for his monthly order of soda. This is an example of
A) trade credit.
B) barter.
C) peer-to-peer lending.
D) collateral.
E) revolving credit.

Accepted Answer

This is an example of barter, which is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. Malik is exchanging tickets to his fun center for soda, which is a direct trade of goods/services.

Question 2

Tatjana received $100 for her birthday last week. She spent $50 on a new video game and put the other $50 aside for a vacation she has planned next month. The money she savedbest represents which function of money?
A) store of wealth
B) means of leverage
C) standard of value
D) terms of interest
E) medium of exchange

Accepted Answer

The money Tatjana saved for her vacation represents a "store of wealth," as she is holding onto the money to use in the future, demonstrating money's ability to preserve value over time.

Question 3

Antanas is tired of living paycheck to paycheck. He tells his friend Irena that he is going to start counterfeiting U.S. currency to help him get rich quick. Irena feels bad but tells him that his plan will most likely fail due to the ________ of money.
A) factoring
B) debenture
C) durability
D) uniqueness
E) stability

Accepted Answer

The correct answer is D) uniqueness, because U.S. currency has many unique and complex security features designed to prevent counterfeiting, making it extremely difficult for individuals to successfully create counterfeit money.

Question 4

Giedre is going on vacation next week and runs to her bank to pick up traveler's checks to use while she is away. These checks arebest described as an example of which part of the money supply?
A) M1
B) commercial paper
C) demand deposit
D) M2
E) time deposit

Accepted Answer

Traveler's checks are a type of demand deposit, which is included in M1.

Question 5

Lahn placed $100 in a certificate of deposit. After three years he received 10 percent interest on the $100. This is an example of a ________ deposit, which can be further classified as a form of ________.
A) demand; M1
B) bond; NOW
C) time; M2
D) paper; M1
E) promissory; M2

Accepted Answer

A certificate of deposit is a type of time deposit, which is part of M2 money supply classification.

Question 6

Cong works in the banking industry. He is responsible for ensuring that member banks in his district have enough cash on hand to serve customers during the holiday buying season. Congmost likely works in
A) a chartered bank.
B) the Bureau of Engraving and Printing.
C) a commercial bank.
D) the Federal Reserve Bank.
E) the Board of Governors.

Accepted Answer

The Federal Reserve Bank is responsible for regulating the banking industry and ensuring that banks have enough cash on hand to meet customer demands, including during peak times like the holiday buying season. This includes tasks such as distributing currency to member banks.

Question 7

When Marston's son turned 16, he helped him open an interest-bearing checking account at the local bank. This account canbest be classified as
A) M2.
B) time deposit.
C) demand deposit.
D) interest deposit.
E) M1.

Accepted Answer

Demand deposits are checking accounts that allow depositors to withdraw funds at any time.

Question 8

Ahlai works for the Fed and is conducting a seminar about money supply. An attendee says he thinks people borrow too much money and suggests that the Fed remove half of the money in the money supply. What would be Ahlai'sbest response regarding the outcome if the Fed followed this advice?
A) Consumer borrowing would go up.
B) There would be an oversupply of goods and services.
C) Prices for goods and services would increase.
D) The reserve requirement would decrease.
E) There would be fewer bonds available for the Fed to buy.

Accepted Answer

Removing half of the money in the money supply would likely lead to a decrease in consumer spending, resulting in an oversupply of goods and services since demand would drop significantly.

Question 9

The market is currently seeing lower interest rates and increased economic growth. Which Fed tool for controlling the money supply wasmost likely used to cause this to occur?
A) They purchased bonds from the public.
B) They increased the discount rate.
C) They increased the reserve requirement.
D) They sold bonds to the public.
E) They decreased EFT fees.

Accepted Answer

The answer of The market is currently seeing lower interest...

Question 10

The Fed is considering increasing the amount of money that banks are required to keep in their vault. This amount is known as the ________ and an increase would most likely cause ________ to interest rates.
A) discount rate; no change
B) indenture term; a decrease
C) reserve requirement; an increase
D) reserve requirement; a decrease
E) discount rate; an increase

Accepted Answer

An increase in the reserve requirement means banks have less money to lend out, which can lead to higher interest rates as the supply of available money decreases.

Question 11

Luna placed $1,000 in an interest-bearing checking account. She can write as many checks as she needs to each month but must keep her balance above $500. Luna most likely opened a ________ account.
A) NOW
B) certificate of deposit
C) promissory
D) savings
E) money market

Accepted Answer

A NOW (Negotiable Order of Withdrawal) account allows for unlimited check writing while requiring a minimum balance, fitting the description given.

Question 12

Which activity represents a way that a commercial bank might make money?
A) extending trade credit
B) providing a discount rate
C) decreasing the reserve requirement
D) offering life insurance
E) eliminating loan interest

Accepted Answer

Commercial banks can make money by offering life insurance as it is a financial product that can generate revenue through premiums and investment income.

Question 13

Marsh received a $50,000 inheritance when his aunt passed away last week and decides to deposit the money in a new account at his bank. He wants to make significant interest on his deposit, but also wants the ability to write checks. What is his best option?
A) mutual checking account
B) treasury deposit
C) Super-NOW account
D) certificate of deposit
E) money market account

Accepted Answer

A money market account offers high interest rates and check-writing privileges.

Question 14

Easy Insurance is a new business that offers property and casualty and life and health insurance to customers. Easy Insurance ismost likely a
A) commercial bank.
B) nonbank institution.
C) savings and loan institution.
D) peer-to-peer lender.
E) market mutual company.

Accepted Answer

Easy Insurance, offering property and casualty along with life and health insurance, aligns with the operations of a nonbank financial institution. Nonbank institutions include insurance companies, which provide risk management products and services but do not offer traditional banking services like accepting deposits or making loans in the manner that banks and savings institutions do.

Question 15

DeAndre recently took a new job with Macklemore Industries. He is responsible for buying and selling stocks for individuals looking for assistance. Macklemore Industries ismost likely a(n)
A) finance company.
B) insurance company.
C) brokerage firm.
D) credit union.
E) treasury fund.

Accepted Answer

DeAndre's role involves buying and selling stocks for individuals, which is a service typically provided by a brokerage firm. Brokerage firms are financial institutions that facilitate the buying and selling of financial securities between a buyer and a seller.

Question 16

Danyou is hired to work for Bristol Motors. Bristol is a large corporation that even has its own financial institution. Danyou does some research on the financial institution and learns that he can get all the same services he has at his current bank, albeit with slightly higher interest rates. Bristol's financial institution ismost likely a(n)
A) pension fund.
B) credit union.
C) brokerage firm.
D) insurance company.
E) mutual savings cooperative.

Accepted Answer

Credit unions are financial institutions that offer the same services as banks (such as savings accounts, loans, and checking accounts) but are owned by their members rather than shareholders. The scenario suggests that Bristol's financial institution offers banking services and is likely owned by members (employees of the corporation), which aligns with the characteristics of a credit union. Higher interest rates for savings accounts are also common in credit unions compared to traditional banks.

Question 17

Antoinette wants to take out a mortgage. Her friend recommended she look into her bank, so Antoinette decided to do some research. Everything appeared to be the same except her friend's bank appeared to be owned by depositors rather than shareholders. Antoinette's friendmost likely recommended a
A) savings and loan association.
B) brokerage firm.
C) demand deposit institution.
D) mutual savings bank.
E) credit union.

Accepted Answer

A mutual savings bank is owned by its depositors rather than shareholders, which matches the description given.

Question 18

Andrei has been hired by his friend Andy to serve as the financial manager for Andy's company. Andy assigns Andrei his first job: evaluating the risk-return trade-off for the company. Help Andrei by defining risk-reward trade-off and provide two examples to help with your explanation.

Accepted Answer

The answer of Andrei has been hired by his friend...

Question 19

Carol is a financial manager at a large bank. As part of the bank's community outreach efforts, Carol conducts regular seminars for business owners. Her last presentation was designed for individuals who are considering opening their own business. She wants to help them to understand the four reasons a company might need financing. List the reasons and provide an example of each for support.

Accepted Answer

The answer of Carol is a financial manager at a...

Question 20

Prairie Office Supplies needs money, but its loan application was rejected. The owner suggests that the finance manager utilize accounts receivable to obtain funds. Describe the characteristics of the potential options available to the manager.

Accepted Answer

The answer of Prairie Office Supplies needs money, but its...

Quiz 3: Fundamentals of Economics and Types of Markets

Malik runs a fun center that offers go-karts, mini-golf, and more. He is low on money and offers his soda supplier free tickets to the fun center in exchange for his monthly order of soda. This is an example of

Tatjana received $100 for her birthday last week. She spent $50 on a new video game and put the other $50 aside for a vacation she has planned next month. The money she savedbest represents which function of money?

Antanas is tired of living paycheck to paycheck. He tells his friend Irena that he is going to start counterfeiting U.S. currency to help him get rich quick. Irena feels bad but tells him that his plan will most likely fail due to the ________ of money.

Giedre is going on vacation next week and runs to her bank to pick up traveler's checks to use while she is away. These checks arebest described as an example of which part of the money supply?

Lahn placed $100 in a certificate of deposit. After three years he received 10 percent interest on the $100. This is an example of a deposit, which can be further classified as a form of .

Cong works in the banking industry. He is responsible for ensuring that member banks in his district have enough cash on hand to serve customers during the holiday buying season. Congmost likely works in

When Marston's son turned 16, he helped him open an interest-bearing checking account at the local bank. This account canbest be classified as

Ahlai works for the Fed and is conducting a seminar about money supply. An attendee says he thinks people borrow too much money and suggests that the Fed remove half of the money in the money supply. What would be Ahlai'sbest response regarding the outcome if the Fed followed this advice?

The market is currently seeing lower interest rates and increased economic growth. Which Fed tool for controlling the money supply wasmost likely used to cause this to occur?

The Fed is considering increasing the amount of money that banks are required to keep in their vault. This amount is known as the and an increase would most likely cause to interest rates.

Luna placed $1,000 in an interest-bearing checking account. She can write as many checks as she needs to each month but must keep her balance above $500. Luna most likely opened a ________ account.

Which activity represents a way that a commercial bank might make money?

Marsh received a $50,000 inheritance when his aunt passed away last week and decides to deposit the money in a new account at his bank. He wants to make significant interest on his deposit, but also wants the ability to write checks. What is his best option?

Easy Insurance is a new business that offers property and casualty and life and health insurance to customers. Easy Insurance ismost likely a

DeAndre recently took a new job with Macklemore Industries. He is responsible for buying and selling stocks for individuals looking for assistance. Macklemore Industries ismost likely a(n)

Antoinette wants to take out a mortgage. Her friend recommended she look into her bank, so Antoinette decided to do some research. Everything appeared to be the same except her friend's bank appeared to be owned by depositors rather than shareholders. Antoinette's friendmost likely recommended a

Andrei has been hired by his friend Andy to serve as the financial manager for Andy's company. Andy assigns Andrei his first job: evaluating the risk-return trade-off for the company. Help Andrei by defining risk-reward trade-off and provide two examples to help with your explanation.

Prairie Office Supplies needs money, but its loan application was rejected. The owner suggests that the finance manager utilize accounts receivable to obtain funds. Describe the characteristics of the potential options available to the manager.