Question 1

A bank holding company is

Accepted Answer

A)  a conglomerate that owns a bank to service the other businesses it owns
B)  a loose federation of private banks that hold assets in common
C)  a corporation that owns one or more banks
D)  a bank that is owned by the depositors
E)  a subsidiary of a major corporationF) A) and E)
G) A) and C) C

Question 2

The value of money is determined by

Accepted Answer

A)  people's belief that it is worth something
B)  the amount of precious metal that the government holds to back the money
C)  the money's market value as a commodity
D)  the rate of interest, which is the price paid to borrow money
E)  its ability to function as a unit of accountF) All of the above
G) A) and E)

Question 3

When the Federal Reserve System was established,

Accepted Answer

A)  all banks were required to become members
B)  only federally chartered banks were allowed to join
C)  only federally chartered banks were required to join
D)  most banks joined even though none were required to join
E)  membership was required for all banks in some states, but not in othersF) A) and D)
G) B) and C) C

Question 4

In prisoner of war camps during WWII which common commodity often served the function of money?

Accepted Answer

A)  chocolate bars
B)  cigarettes
C)  cans of tuna fish
D)  bars of soap
E)  band aidsF) C) and E)
G) A) and B)

Question 5

Which of the following countries has the most number of banks among the top 25 based on worldwide assets?

Accepted Answer

A)  France
B)  Japan
C)  United Kingdom
D)  Netherlands
E)  United StatesF) B) and E)
G) C) and D)

Question 6

Eileen puts $10,000 in a federally insured checking account at the First National Bank. Norma borrows $10,000 from the First National Bank, flies to a South Pacific island, and is never heard from again. Which of the following is true?

Accepted Answer

A)  Eileen will lose her $10,000.
B)  Eileen will lose her $10,000 if she and Norma are related.
C)  Eileen will lose her $10,000 if the First National Bank makes all of its loans to people who run off to South Pacific islands.
D)  Eileen will not lose her $10,000 no matter what happens to the First National Bank.
E)  Eileen will not lose her $10,000 unless there is a run on the First National Bank.F) B) and D)
G) A) and B)

Question 7

U.S. banks have grown primarily through

Accepted Answer

A)  America's longstanding preference for big banks
B)  surviving banks buying up bankrupt banks
C)  excellent customer service
D)  mergers and acquisitions
E)  All of the answers are correctF) C) and D)
G) A) and E)

Question 8

To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.

Accepted Answer

A) True 
 B)False

Question 9

Gresham's Law states that when different forms of commodity money circulate simultaneously (e.g., $1 gold coins and $1 silver coins) ,

Accepted Answer

A)  the one with the more intrinsic ("commodity")  value will disappear from circulation
B)  the one with the lesser intrinsic ("commodity")  value will disappear from circulation
C)  both will eventually have to be withdrawn from circulation by the government
D)  the resultant disruption in the money markets will cause inflation
E)  the resultant disruption in the money markets will cause a recessionF) None of the above
G) C) and E)

Question 10

The currency of Camelot is the noble. King Arthur orders the minting of a five-noble gold coin, but it costs only four nobles to mine and process the amount of gold in the coin. Which of the following statements is true?

Accepted Answer

A)  Five-noble coins will not be accepted in exchange.
B)  Five-noble coins will be accepted only by the government.
C)  When King Arthur spends these coins, he profits.
D)  When King Arthur takes these coins in again in the form of taxes, he profits.
E)  When these coins circulate through spending or taxation, King Arthur receives a profit of one noble, less seigniorage.F) B) and D)
G) A) and C)

Question 11

Which of the following would not perform well as money?

Accepted Answer

A)  coins
B)  sea shells
C)  honey
D)  diamonds
E)  cigarettesF) A) and B)
G) A) and C)

Question 12

Which of the following have, at one time or another, been part of the U.S. money supply?

Accepted Answer

A)  seashells
B)  platinum coins
C)  token money
D)  legal tender
E)  private bank notesF) A) and B)
G) D) and E)

Question 13

The actions of the Fed

Accepted Answer

A)  must be approved by the president and the Congress
B)  must be approved by the president alone
C)  must be approved by the Congress alone
D)  are not subject to approval by any branch of government
E)  are subject to the approval of the electorateF) B) and E)
G) B) and D)

Question 14

Gresham's Law states that people

Accepted Answer

A)  sell goods for money but prefer to buy goods with other goods
B)  buy and sell goods with money
C)  spend some money and hoard some money
D)  spend lower-quality money and hoard higher-quality money
E)  spend higher-quality money and hoard lower-quality moneyF) A) and E)
G) C) and E)

Question 15

All of the following are reasons that cigarettes came to serve as money in WWII prisoner of war camps except one. Which is the exception?

Accepted Answer

A)  cigarettes are of uniform quality
B)  cigaretttes were in limited supply
C)  cigarettes are reasonably durable
D)  cigarettes could not be counterfeited
E)  cigarettes could individually support small transactions and in packs they could support large transactionsF) B) and E)
G) C) and D)

Question 16

The unit of account function of money

Accepted Answer

A)  all of the following are correct
B)  means that money makes price information more accessible
C)  requires that money be made of something valuable
D)  means that money can be used to save up purchasing power
E)  means that money is more easily counted than goodsF) A) and D)
G) All of the above

Question 17

Before the specialization

Accepted Answer

A)  families were largely self-sufficient
B)  families produced much more than they could each consume
C)  there was a great need for exchange between families
D)  families consumed much more than they could each produce
E)  None of the answers is correctF) C) and D)
G) B) and D)

Question 18

The more specialized labor is,

Accepted Answer

A)  the less likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop
B)  the less likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop
C)  the more likely it is that a double coincidence of wants will exist, and the less likely it is that monetary exchange will develop
D)  the more likely it is that a double coincidence of wants will exist, and the more likely it is that monetary exchange will develop
E)  the more likely it is that individuals are producing only what they want to consumeF) A) and D)
G) A) and E) B

Question 19

Bank holding companies

Accepted Answer

A)  b, c, and d are correct
B)  can often engage in interstate banking
C)  can provide financial advisory services
D)  have access to more sources of funds than individual commercial banks
E)  are subject to the same regulations as commercial banksF) A) and D)
G) A) and C)

Question 20

When prices rise,

Accepted Answer

A)  the purchasing power of money increases
B)  the purchasing power of money decreases
C)  the purchasing power of money remains unchanged
D)  the purchasing power of money either increases or decreases, depending upon the size of the national debt
E)  the purchasing power of money either increases or decreases, depending upon the level of government expendituresF) None of the above
G) B) and C)

Exam 15: Money and the Financial System

A bank holding company is

Correct AnswerverifiedC

The value of money is determined by

Correct AnswerverifiedShow Answer

When the Federal Reserve System was established,

Correct AnswerverifiedC

In prisoner of war camps during WWII which common commodity often served the function of money?

Correct AnswerverifiedShow Answer

Which of the following countries has the most number of banks among the top 25 based on worldwide assets?

Correct AnswerverifiedShow Answer

Eileen puts $10,000 in a federally insured checking account at the First National Bank. Norma borrows $10,000 from the First National Bank, flies to a South Pacific island, and is never heard from again. Which of the following is true?

Correct AnswerverifiedShow Answer

U.S. banks have grown primarily through

Correct AnswerverifiedShow Answer

To say that money serves as a store of value is to say that money is a useful way to store wealth for future use.

Correct AnswerverifiedShow Answer

Gresham's Law states that when different forms of commodity money circulate simultaneously (e.g., $1 gold coins and $1 silver coins) ,

Correct AnswerverifiedShow Answer

The currency of Camelot is the noble. King Arthur orders the minting of a five-noble gold coin, but it costs only four nobles to mine and process the amount of gold in the coin. Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following would not perform well as money?

Correct AnswerverifiedShow Answer

Which of the following have, at one time or another, been part of the U.S. money supply?

Correct AnswerverifiedShow Answer

The actions of the Fed

Correct AnswerverifiedShow Answer

Gresham's Law states that people

Correct AnswerverifiedShow Answer

All of the following are reasons that cigarettes came to serve as money in WWII prisoner of war camps except one. Which is the exception?

Correct AnswerverifiedShow Answer

The unit of account function of money

Correct AnswerverifiedShow Answer

Before the specialization

Correct AnswerverifiedShow Answer

The more specialized labor is,

Correct AnswerverifiedB

Bank holding companies

Correct AnswerverifiedShow Answer

When prices rise,

Correct AnswerverifiedShow Answer

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C

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C

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B

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