This quiz works best with JavaScript enabled. Home > Money And Banking > Money And Banking – Quiz 4 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Money And Banking Quiz 4 (20 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) Will. B) Testtament. C) Heritage. D) Inheritance. Show Answer Correct Answer: A) Will. 3. The risk of ending up with the equivalent of a never-ending loan is one of the disadvantages of using A) Debit cards. B) Credit cards. C) Savings accounts. D) Checking accounts. Show Answer Correct Answer: B) 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) $ 100. C) $ 400. D) $ 0. E) $ 450. 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) $ 10, 000. B) $ 9, 000. C) $ 1, 000. D) $ 0. Show Answer Correct Answer: A) $ 10, 000. 8. A listing of financial assets owned by an individual A) Portfolio. B) Diversification. C) Stock Split. D) Principal. Show Answer Correct Answer: A) 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) Medium of Exchange. B) Store of Value. C) Unit of Account. D) Acceptable. Show Answer Correct Answer: B) Store of Value. 13. The function of money that provides a means for comparing the values of goods and services. A) Unit of Account. B) Store of Value. C) Medium of Exchange. D) Acceptability. Show Answer Correct Answer: A) 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) 10%. B) 4%. C) 2%. D) -2%. Show Answer Correct Answer: C) 2%. 15. ..... is money that is deemed legal tender by the government, and it is not based on or convertible into a commodity. A) Money supply. B) Liquidity. C) Fiat money. D) Commodity money. Show Answer Correct Answer: C) 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) Money owed must be paid on time. B) The government must control the money supply. C) Banks must hold sufficient gold to cover any paper money they give out. D) Customers with checking accounts cannot earn interest on those accounts. Show Answer Correct Answer: B) 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. ← PreviousNext →Related QuizzesMoney And Banking Quiz 1Money And Banking Quiz 2Money And Banking Quiz 3Money And Banking Quiz 5Money And Banking Quiz 6Money And Banking Quiz 7Money And Banking Quiz 8Money And Banking Quiz 9Money And Banking Quiz 10Money And Banking Quiz 11 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books