Money And Banking Quiz 18 (20 MCQs)

Quiz Instructions

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1. Now that he has retired, he lives partly on his pension and partly on the ..... his post office savings account.

Correct Answer: D) Interest.

2. Anything that people will accept as payment for goods and service

Correct Answer: A) Money.

3. Inflation is to be combated the RBI-

Correct Answer: C) Raise both CRR and SLR.

4. The federal funds rate is the rate:

Correct Answer: B) One bank would pay another bank for a loan.

5. What of the following is a typical start up requirement for a sole proprietorship?

Correct Answer: A) Obtaining a business license.

6. If Rose purchased a new computer and paid by credit card, she is using money as

Correct Answer: D) A standard of deferred payment.

7. Money that can be easily divided into smaller units of value has the characteristic of

Correct Answer: A) Divisibility.

8. Who appoints the chairman of the Federal Reserve?

Correct Answer: C) President.

9. The potential amount of money that banks can create based on the initial deposit.

Correct Answer: B) Money Multiplier.

10. Buying and selling US government securities (bonds) to raise and lower interest rates

Correct Answer: D) Open Market Operation.

11. Which of these is a fiat currency used in the colony of Connecticut in 1645?

Correct Answer: D) Wampum.

12. When money serves as a mechanism for transforming current income into future purchases, it is functioning as a

Correct Answer: D) Store of value.

13. In the 1800's, people in mining towns in the West often paid for goods with gold nuggets or gold dust. What was the function of gold?

Correct Answer: B) It was used as a currency.

14. John asked his parents if they would pay off his .....

Correct Answer: A) Debts.

15. The process of spreading your assets among several different types of investments to reduce risks

Correct Answer: C) Diversification.

16. What is the current central banking system of the United States called?

Correct Answer: D) Federal Reserve System.

17. Bartering is difficult if high value items cannot be broken up into smaller value items in order to exchange for low value items

Correct Answer: C) Divisibility.

18. Bonds are very safe investments. Which is true of AAA ratings.

Correct Answer: D) They have low interest rates.

19. The higher the LRR credit creation will be

Correct Answer: B) Lower.

20. What happens during a bank run?

Correct Answer: D) Customers try to withdreaw more money than the bank has on hand.