Question 1

A credit union is owned and controlled by the government.

Accepted Answer

A credit union is a member-owned financial cooperative, controlled by its members and operated on the principle of people helping people, providing its members credit at competitive rates as well as other financial services.

Question 2

_____ is best described as a paper money that is not readily convertible to a precious metal such as gold.
A)A bitcoin
B)A credit card
C)A debit card
D)Plastic money
E)Fiat money

Accepted Answer

Fiat money is a type of currency that is not backed by a physical commodity like gold or silver but is made legal tender through government regulation. Unlike precious metals or commodity-backed currencies, fiat money derives its value largely from the public's trust in the issuer, typically the government.

Question 3

Money is a medium of exchange.

Accepted Answer

Money is defined as a medium of exchange that is widely accepted in transactions for goods and services.

Question 4

When the Federal Reserve Board (the Fed)buys securities,it decreases the money in circulation.

Accepted Answer

When the Federal Reserve buys securities, it increases the money supply by injecting more money into the banking system, making more funds available for lending and investment.

Question 5

Ryan traded his tablet PC for a cellphone.Since both were of the same value,there was no exchange of money.Which of the following concepts does this scenario illustrate?
A)Discounting
B)Checking
C)Bartering
D)Accruing
E)Devaluing

Accepted Answer

Bartering refers to the direct exchange of goods or services without the use of money, which is exactly what occurred between Ryan and the other party when they traded items of equal value.

Question 6

A person swaps a bag of fruits for some meat.In this case,money functions as a:
A)standard of value.
B)store of value.
C)measure of value.
D)medium of exchange.
E)counterfeit deterrent.

Accepted Answer

In this scenario, money is not directly used; instead, goods (fruits and meat) are directly exchanged for each other. This is a barter system, not involving money as a medium of exchange. However, the correct answer refers to the function money would typically serve in transactions. Since money is not being used in this direct swap, none of its functions are directly applied. The closest function, "medium of exchange," is incorrectly suggested by the context, as it implies the use of money to facilitate trade, which is not happening here.

Question 7

Finance companies buy and sell stocks and bonds for their customers.

Accepted Answer

Finance companies typically provide loans and credit facilities to individuals and businesses, rather than buying and selling stocks and bonds, which is more commonly done by investment banks and brokerage firms.

Question 8

For money to serve effectively as a measure of value,all items must be valued in terms of comparable units.Which of the following characteristics of money does this statement reflect?
A)Divisibility
B)Durability
C)Acceptability
D)Stability
E)Portability

Accepted Answer

Divisibility is the characteristic of money that allows it to be divided into smaller units without losing its value. This is important for money to serve effectively as a measure of value because it allows all items to be valued in terms of comparable units. For example, if a loaf of bread costs $1 and a gallon of milk costs $2, then we can say that the loaf of bread is worth half as much as the gallon of milk. This is only possible because money is divisible into smaller units.

Question 9

Certificates of deposit are accounts with funds that usually cannot be withdrawn without advance notice and/or have limits on the number of withdrawals per period.

Accepted Answer

Saving accounts are funds that usually cannot be withdrawn without advance notice,also known as time deposits.CDs are accounts that guarantee depositors a set interest rate so long as the funds are not withdrawn before the end of the set interval.

Question 10

For money to function as a medium of exchange,it must be easily moved from one location to the next.Which of the following characteristics of money does this statement reflect?
A)Divisibility
B)Durability
C)Acceptability
D)Stability
E)Portability

Accepted Answer

Portability refers to the ease with which money can be transported from one location to another, making it a crucial characteristic for money to function effectively as a medium of exchange.

Question 11

The life expectancy of a $20 bill is estimated to be 7.7 years.Which of the following characteristics of money does this statement illustrate?
A)Divisibility
B)Durability
C)Acceptability
D)Stability
E)Portability

Accepted Answer

The statement illustrates the characteristic of durability, as it refers to the physical lifespan or endurance of the currency over time.

Question 12

When money serves as a way to accumulate wealth,money primarily functions as a:
A)yardstick of value.
B)store of value.
C)measure of value.
D)medium of exchange.
E)counterfeit deterrent.

Accepted Answer

Money functions as a store of value when it is used to accumulate wealth, meaning it can retain its value over time and be used to make purchases in the future.

Question 13

As a measure of value,money primarily serves as a(n):
A)varying denominator that allows people to compare the different goods and services that can be consumed at various income levels.
B)common standard or yardstick of the worth of goods and services.
C)way to accumulate wealth.
D)agent contributing to inflation.
E)agent contributing to deflation.

Accepted Answer

Money serves as a common standard or yardstick of the worth of goods and services, making it easier to compare their values and facilitate trade.

Question 14

To be used as a medium of exchange,money must be:
A)non-portable.
B)durable.
C)imitable.
D)indivisible.
E)flexible.

Accepted Answer

Money must be durable to withstand the wear and tear of being used as a medium of exchange.

Question 15

As a medium of exchange,money:
A)makes it harder to trade.
B)creates a complicated service structure.
C)reduces the need for bartering.
D)is indivisible.
E)can easily be counterfeited.

Accepted Answer

Money serves as a medium of exchange by reducing the need for bartering, making transactions more straightforward and efficient.

Question 16

When a person pays $23,000 to buy a car,money primarily functions as a:
A)means of savings.
B)store of value.
C)measure of value.
D)treasury bill.
E)counterfeit deterrent.

Accepted Answer

Money, when used to buy a car, primarily functions as a measure of value, as it provides a way to quantify the value of the car in monetary terms.

Question 17

To be effective,money must be readily received for the purchase of goods and services and for the settlement of debts.Which of the following characteristics of money does this statement reflect?
A)Divisibility
B)Durability
C)Acceptability
D)Stability
E)Portability

Accepted Answer

Acceptability is the characteristic of money that ensures it is readily received for the purchase of goods and services and for the settlement of debts. This means that for money to be effective, it must be widely accepted by people in exchange for goods, services, or to settle debts.

Question 18

U.S.money includes subtle colors in addition to the traditional green,as well as enhanced security features,such as a watermark,security thread,and color-shifting ink.Which of the following characteristics of money is being protected by these measures?
A)Acceptability
B)Inimitability
C)Divisibility
D)Stability
E)Portability

Accepted Answer

The enhanced security features like watermarks, security threads, and color-shifting ink are designed to protect the inimitability of U.S. money. These features make it difficult to counterfeit, ensuring that the currency remains unique and secure.

Question 19

Which of the following statements is true of money?
A)It is not a gold-backed currency.
B)It is not readily convertible to precious metal.
C)It is anything accepted in exchange for goods and services.
D)It is exclusively dispatched through automated teller machines.
E)It needs to be accompanied by a government "note" or promise to be considered valid.

Accepted Answer

Money is anything that is generally accepted as a medium of exchange for goods and services.

Question 20

Which of the following characteristics of money allows people to postpone purchases and save their money to do so?
A)Divisibility
B)Imitability
C)Acceptability
D)Stability
E)Portability

Accepted Answer

Stability is the characteristic of money that allows people to postpone purchases and save their money, as it ensures that the value of money remains relatively constant over time.

Quiz 15: Money and the Financial System

A credit union is owned and controlled by the government.

_____ is best described as a paper money that is not readily convertible to a precious metal such as gold.

Money is a medium of exchange.

When the Federal Reserve Board (the Fed)buys securities,it decreases the money in circulation.

Ryan traded his tablet PC for a cellphone.Since both were of the same value,there was no exchange of money.Which of the following concepts does this scenario illustrate?

A person swaps a bag of fruits for some meat.In this case,money functions as a:

Finance companies buy and sell stocks and bonds for their customers.

For money to serve effectively as a measure of value,all items must be valued in terms of comparable units.Which of the following characteristics of money does this statement reflect?

Certificates of deposit are accounts with funds that usually cannot be withdrawn without advance notice and/or have limits on the number of withdrawals per period.

For money to function as a medium of exchange,it must be easily moved from one location to the next.Which of the following characteristics of money does this statement reflect?

The life expectancy of a $20 bill is estimated to be 7.7 years.Which of the following characteristics of money does this statement illustrate?

When money serves as a way to accumulate wealth,money primarily functions as a:

As a measure of value,money primarily serves as a(n) :

To be used as a medium of exchange,money must be:

As a medium of exchange,money:

When a person pays $23,000 to buy a car,money primarily functions as a:

To be effective,money must be readily received for the purchase of goods and services and for the settlement of debts.Which of the following characteristics of money does this statement reflect?

U.S.money includes subtle colors in addition to the traditional green,as well as enhanced security features,such as a watermark,security thread,and color-shifting ink.Which of the following characteristics of money is being protected by these measures?

Which of the following statements is true of money?

Which of the following characteristics of money allows people to postpone purchases and save their money to do so?