quiz questions and answers
Question 1
10 / 10 pts
Which of the following items is not one of the six parts of a financial system?
Correct! Debit cards
Financial instruments
Financial markets
Central Bank
Question 2
10 / 10 pts
What is the name of the Central Bank of the United States?
Correct! The Federal Reserve System
Bank of America
Chase
Citibank
Question 3
10 / 10 pts
Which of the following is not a characteristic of money?
Correct! It should have intrinsic value
It is a store of value
It is a means of payment
It is a unit of account
Question 4
10 / 10 pts
The unit of account function of money refers to the fact that
Correct! prices are expressed in terms of money
we use money to transfer value over time.
makes it hard to compare prices of different goods and services
means that money finalizes payments.
Question 5
10 / 10 pts
The store of value function of money refers to the fact that
Correct! money allows people to transfer value into the future
money is the only way people have to store value.
people save most of their money.
money is only valuable if it is stored.
Question 6
10 / 10 pts
The value of fiat money comes from
Correct! government decree
intrinsic value
the material used to produce money
where it is stored
Question 7
10 / 10 pts
The U.S currency today is a commodity-backed money
True
Correct! False
Question 8
8 / 10 pts
Explain in your own words what liquidity of an asset is.
Your Answer:
liquidity of an asset is how quickly we can turn that asset into cash.
Converting the asset into cash rapidly, without losing value.
Question 9
8 / 10 pts
Rank the following assets from the most liquid to the least liquid:
A) checking account deposits
B) houses
C) currency (cash)
D) automobiles
E) savings deposits
F) stocks
Correct! C, A, E, F, D, B
Question 10
10 / 10 pts
What are the two institutions that can create money?
Your Answer:
Two institutions that can create money are the central bank and commercial banks
A Central Bank and a Commercial Bank
Question 1
10 / 10 pts
Which of the following items are not part of the assets on the balance sheet of a central bank?
Correct! currency
It's on the liability side
loans
securities
gold
Question 2
10 / 10 pts
Which of the following statements is most correct?
Correct! Reserves are assets of the commercial banks and liabilities of the central bank.
Reserves are assets of the central bank and liabilities of the U.S. Treasury.
Reserves are assets of the central bank and liabilities of the commercial banks
Reserves are liabilities of the commercial banks and assets of the U.S. Treasury
Question 3
10 / 10 pts
The monetary base is composed of:
Correct! currency in the hands of the public and bank reserves
M1 and M2
M1 + reserves
M1 + M2 + reserves
Question 4
10 / 10 pts
What would happen to the monetary base if there is a bank run - people converting their deposits into cash? Would it increase, decrease, or no effect? And why?
Your Answer:
it would have no effect because the monetary base is the currency in circulation so physically cash the only toll that it would have is less money supply.
Question 5
0 / 10 pts
Commercial banks lend the money that you have deposited there to other people.
You Answered
True (banks do not lend other people's money!!)
Correct Answer False
Question 6
8 / 10 pts
What is wrong with this statement? "Central Banks can create 3 types of money: currency, reserves, and demand deposits".
Your Answer:
the central bank can only create 2 types of money; physical money and electronic money.
Question 7
10 / 10 pts
Demand deposits are considered a __________ in a bank's balance sheet.
Correct! liability
Question 8
0 / 10 pts
Banks can create money with a simple accounting operation by increasing both its asset and liability sides of their balance sheet.
Correct Answer True
False
Question 9
4 / 10 pts
What are the 3 kinds of services a bank provides?
Your Answer:
Circulating money, making money appear out of nothing, holding your money
Question 10
0 / 10 pts
“Banks need both reserves and deposits prior to giving a loan". True or false?
True
Correct Answer False
Question 1
10 / 10 pts
What is the main role of a financial system?
Correct! facilitate production, employment, and consumption, allowing economic growth
provide jobs in the financial sector.
provide a place for wealthy households to save
be a low-cost source of funds for government
Question 2
10 / 10 pts
If Joanna purchases a U.S. Treasury bond; the bond is a(n):
Correct! liability of the U.S. government and an asset for Joanna
asset of the U.S. government as well as an asset for Joanna
asset for Joanna but not a liability of the U.S. Government.
asset for the government but a liability for Joanna
Question 3
10 / 10 pts
Which of the following is not a financial instrument?
Correct! A cellphone bill
A share of Apple
A car insurance policy
A U.S. Treasury Bond
Question 4
10 / 10 pts
A primary financial market is:
Correct where newly issued securities are sold and bought
a market just for corporate stocks
the New York Stock Exchange
the NASDAQ
Question 5
10 / 10 pts
Secondary financial markets:
Correct! are financial markets where existing securities are bought and sold.
are only for stock.
are financial markets for all financial instruments that have a high probability of default
cannot be accessed by financial institutions
Question 6
10 / 10 pts
Equity markets are markets:
Correct! for stocks
for stocks and bonds
for US Treasury bonds
for bonds only
Question 7
10 / 10 pts
Debt instruments that have maturities less than one year are traded in the:
Correct! money market
capital market
primary market only
equity market