This quiz works best with JavaScript enabled. Home > Finance > Money And Banking > Money And Banking – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Money And Banking Quiz 3 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Main responsibility of the Federal Reserve System A) Establish monetary policy. B) Print money. C) Engrave coins. D) Gain power. Show Answer Correct Answer: A) Establish monetary policy. 2. They were left a lot of money in their aunt's ..... A) Heritage. B) Will. C) Inheritance. D) Testtament. Show Answer Correct Answer: B) Will. 3. The risk of ending up with the equivalent of a never-ending loan is one of the disadvantages of using A) Checking accounts. B) Savings accounts. C) Credit cards. D) Debit cards. Show Answer Correct Answer: C) Credit cards. 4. The money supply increases, what happens in the money market? (Assuming money demand is downward sloping) A) The nominal interest rate rises. B) The nominal interest rate falls. C) Transaction demand for money falls. D) The nominal interest rate does not change. Show Answer Correct Answer: B) The nominal interest rate falls. 5. This is a formula that the FED uses to calculate the amount of total deposits each bank has to have accounted for. A) Responsibilities of FED. B) Fiat Money. C) Reserve Requirement. D) Gold Standard. Show Answer Correct Answer: C) Reserve Requirement. 6. If the reserve requirement is 20%, and a customer deposits $ 100, what is the max. change in the money supply once all money has been loaned out? A) $ 500. B) $ 0. C) $ 400. D) $ 450. E) $ 100. Show Answer Correct Answer: C) $ 400. 7. A commercial bank sells $ 10k in securities. The reserve requirement is 10%. How much of the money can the bank lend? A) $ 0. B) $ 9, 000. C) $ 1, 000. D) $ 10, 000. Show Answer Correct Answer: D) $ 10, 000. 8. A listing of financial assets owned by an individual A) Principal. B) Portfolio. C) Stock Split. D) Diversification. Show Answer Correct Answer: B) Portfolio. 9. Why would investors buy a junk bond? A) They want to invest in a particular company although it may not pay off. B) They want a steady source of income with low risk. C) Junk bonds have a higher rating than municipal bonds. D) Junk bonds pay a potentially higher level of interest than other bonds. Show Answer Correct Answer: D) Junk bonds pay a potentially higher level of interest than other bonds. 10. The quantity of investment demanded most likely increases when A) Real GDP increases. B) The cost of acquiring and maintaining capital equipment rises. C) The real rate of interest rates decreases. D) Taxes on business investment rise. Show Answer Correct Answer: C) The real rate of interest rates decreases. 11. Money multiplier is A) 1/ CRR. B) 1/ SLR. C) 1/ LRR. D) NONE OF THESE. Show Answer Correct Answer: C) 1/ LRR. 12. If a $ 20 bill is still worth $ 20 in 10 years, which function of money is being used? A) Store of Value. B) Acceptable. C) Medium of Exchange. D) Unit of Account. Show Answer Correct Answer: A) Store of Value. 13. The function of money that provides a means for comparing the values of goods and services. A) Store of Value. B) Acceptability. C) Unit of Account. D) Medium of Exchange. Show Answer Correct Answer: C) Unit of Account. 14. If the nominal interest rate is 6 percent and the expected inflation rate is 4 percent, what is the real interest rate? A) -2%. B) 10%. C) 4%. D) 2%. Show Answer Correct Answer: D) 2%. 15. ..... is money that is deemed legal tender by the government, and it is not based on or convertible into a commodity. A) Fiat money. B) Money supply. C) Commodity money. D) Liquidity. Show Answer Correct Answer: A) Fiat money. 16. Bartering is difficult if the items being traded are physically difficult to transport A) Double coincidence of wants. B) Portability. C) Divisibility. D) None of above. Show Answer Correct Answer: B) Portability. 17. What condition is necessary for a fiat money system to work? A) The government must control the money supply. B) Customers with checking accounts cannot earn interest on those accounts. C) Banks must hold sufficient gold to cover any paper money they give out. D) Money owed must be paid on time. Show Answer Correct Answer: A) The government must control the money supply. 18. Which of the following is the source of the supply of loanable funds? A) The stock market. B) Investors. C) Banks and mutual funds. D) Savers. Show Answer Correct Answer: D) Savers. 19. Why does a bank sometimes hold excess reserves? A) To be sure they can meet their customers' demands. B) To protect against high prices. C) To make check clearing easier. D) To keep from lending too much money. Show Answer Correct Answer: A) To be sure they can meet their customers' demands. 20. Printed on a Federal Reserve note is this statement: "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE. " This reflects money's function as A) All of these. B) Store of value. C) Medium of exchange. D) Portability. Show Answer Correct Answer: C) Medium of exchange. 21. Why does the Federal Reserve alter monetary policy? A) To regulate the banking industry. B) To provide services to member banks. C) To lessen the effect of natural business cycles. D) To enable banks to clear checks. Show Answer Correct Answer: C) To lessen the effect of natural business cycles. 22. A stock split is most likely to occur when A) A company is losing money. B) Stockholders demand higher dividends. C) The price of a stock becomes too high. D) The stock market as a whole is doing poorly. Show Answer Correct Answer: C) The price of a stock becomes too high. 23. An example of equity is A) A long-term certificate of deposit. B) A treasury bill. C) A share of stock. D) A treasury bond. Show Answer Correct Answer: C) A share of stock. 24. Money is demanded for speculative motives in order to A) Generate profit from the change in price of bonds and speculated change in interest. B) Overcome any uncertainty in the price of goods and services. C) Purchase goods and services that are difficult to obtain in the market. D) Avoid the risk of a drop in the value of money. Show Answer Correct Answer: A) Generate profit from the change in price of bonds and speculated change in interest. 25. In case of a bank failure, customer deposits up to $ 250, 000 per account are guaranteed by the A) 2nd Bank of the United States. B) Federal Reserve Bank. C) Federal Deposit Insurance Corporation. D) Federal Reserve Board. Show Answer Correct Answer: C) Federal Deposit Insurance Corporation. 26. If a customer deposits $ 10, 000 when the reserve ratio (rr) is 0.2. That bank may A) Loan out $ 10, 000. B) Loan out $ 2, 000. C) Loan out $ 8, 000. D) Loan out $ 9, 000. Show Answer Correct Answer: C) Loan out $ 8, 000. 27. What is a mortgage used to purchase? A) Business expenses. B) Car. C) College tuition. D) Real estate. Show Answer Correct Answer: D) Real estate. 28. Money goes from the FED to the bondholder and the bondholder then spends or invests it. The net result A) The money supply disappears from circulation. B) The money supply decreases. C) Money is added to circulation. D) The money supply increases. E) 3 and 4. Show Answer Correct Answer: E) 3 and 4. 29. One way in which the Federal Reserve works to change the United States money supply is by changing the A) Number of banks in operation. B) Discount rate. C) Velocity of money. D) Price level. Show Answer Correct Answer: B) Discount rate. 30. Penny is an artist, and John is a carpenter. Penny agrees to paint a portrait of John's family in exchange for a handmade table created by John. How do Penny and John pay for their goods in their transaction? A) Using a store of value. B) Through bartering. C) With currency. D) Through credit. Show Answer Correct Answer: B) Through bartering. ← PreviousNext →Related QuizzesFinance QuizzesMoney And Banking Quiz 1Money And Banking Quiz 2Money And Banking Quiz 4Money And Banking Quiz 5Money And Banking Quiz 6Money And Banking Quiz 7Money And Banking Quiz 8Money And Banking Quiz 9Money And Banking Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books