chapter 16 quiz

You go to the office supply store to buy a new ink cartridge for your printer. You hand the cashier a​ $20 bill, and she returns your change in the form of smaller bills and coins. Which characteristic of money does this BEST​ represent?

Divisibility

A few years​ ago, Canada introduced new polymer​ (plastic) bank notes instead of paper​ money, explaining that the new bills will last​ 2-3 times longer than paper bills. Which characteristic of money is BEST being addressed by making this​ change?

Durability

Which of the following facilitates the movement of money from one bank account directly to another without any paper money changing​ hands?

Electronic funds transfer​ (EFT)

The​ nation's central​ bank, established by Congress in​ 1913, is the​ _______.

Federal Reserve System

Given a choice between carrying 100 silver dollars or a​ $100 bill, most people will choose the​ $100 bill because​ it's lighter and easier to carry than coins. Which characteristic of money does this BEST​ reflect?

Portability

If the Fed wants to increase the money supply and stimulate the​ economy, which of the following actions would be MOST​ appropriate?

Purchase government securities in the open market

Which of the following would NOT be included in the​ M-1 money​ supply?

Savings accounts

If the Federal Reserve System​ (Fed) wants to decrease the money supply and slow down an​ over-heated economy, which of the following actions would be MOST​ appropriate?

Sell government securities through​ open-market operations

If you sell a textbook to a classmate for​ $25, you can keep the cash in your wallet or deposit it in your bank account and know that it will be worth​ $25 next​ week, next​ month, or even next year. Which function of money does this example BEST​ illustrate?

Store of value

You stop at Starbucks on your way to campus to buy coffee and you swipe your debit card at the​ cashier's station. Which of the following​ occurs?

The funds are automatically transferred from your checking account to the​ store's account.

Within the span of two days in August of​ 2015, China's central bank changed the exchange rate of the yuan​ (or renminbi) from about 6.1 yuan per U.S. dollar to approximately 6.4. Which is the BEST description of the impact of this change on the Chinese​ currency?

This represents a devaluation of the​ yuan, which weakens the yuan against the dollar

Both the World Bank and the International Monetary Fund are agencies of the​ _______.

United Nations

What are the limits of insurance by the Federal Deposit Insurance Corporation​ (FDIC) in the event of the collapse of a financial​ institution?

Up to​ $250,000 per​ depositor, per​ bank, per ownership category

The​ _______ lends billions of dollars each year to developing countries to build​ roads, schools,​ bridges, hospitals, power​ plants, and other economic development projects.

World Bank

At the end of the​ semester, you agree to give your accounting textbook to a classmate in exchange for her economics textbook. This is an example of​ _______.

barter

Nondeposit institutions that specialize in making small noncommercial loans to individuals are known as​ _______.

consumer finance companies

The Board of Governors of the Federal Reserve System is solely responsible for​ _______.

determining the reserve requirements for depository institutions

The​ _______ rate is the interest rate at which the Federal Reserve System​ (the Fed) loans money to member banks.

discount

If the Federal Reserve Bank infused​ $1 billion into the banking system by buying bonds in the open​ market, the money supply would theoretically​ ________.

increase by more than​ $1 billion

Lucinda owns a wine boutique specializing in​ unique, globally-sourced, artisanal wines. She wants to import several cases of wine from a Portuguese distributor. To facilitate this​ transaction, Lucinda's bank issues a​ _______ in which it promises to pay the distributor as soon as the distributor presents proof of shipping.

letter of credit

Financial institutions in the United States create money by​ ________.

loaning out funds in excess of required reserves

Insurance​ companies, finance​ companies, and securities investment dealers are referred to as​ _______ institutions because they use inflowing funds for purposes other than earning interest for depositors.

nondeposit

The​ _______ rate is the interest rate offered by commercial banks to their most creditworthy commercial customers.

prime

To make​ on-campus financial transactions​ easier, a university issues cards with embedded microchips to students. The cards are loaded with an amount of money and they can then be used to make purchases a variety of places on​ campus, such as the​ bookstore, the​ cafeteria, parking​ meters, and even vending machines. This is an example of​ a(n) _______.

smart card

The main goal of federal bailout programs such as the Troubled Asset Relief Program​ (TARP) is to​ ___________.

stabilize the financial system

A small number of the​ nation's commercial banks are insured by​ ________.

the chartering state

The Fed establishes a percentage of deposits that member banks must hold in cash in their vaults or on deposit with a Federal Reserve Bank. This is known as​ _______.

the reserve requirement

A large regional bank currently has deposits of​ $367 million. If the Federal Reserve System increased the reserve requirement from​ 10% to​ 12%, how much LESS would the bank be able to lend to​ consumers?

​$7.34 million

Although you can generally use them in the same​ places, ______ cards allow you to borrow money in small increments to be repaid at a later​ date, whereas​ ______ cards draw funds directly from your bank account.

​credit; debit

Checking accounts are referred to as​ _______ deposits, whereas certificates of deposit are known as​ _______ deposits.

​demand; time