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Homework answers / question archive / 1)Which of the following would not be included in a list of characteristics of money?   Portability Divisibility Stability Usability The five standards for a useful form of money are: (1) portability, (2) divisibility, (3) stability, (4) durability, and (5) uniqueness

1)Which of the following would not be included in a list of characteristics of money?   Portability Divisibility Stability Usability The five standards for a useful form of money are: (1) portability, (2) divisibility, (3) stability, (4) durability, and (5) uniqueness

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1)Which of the following would not be included in a list of characteristics of money?

 

  • Portability
  • Divisibility
  • Stability
  • Usability

The five standards for a useful form of money are: (1) portability, (2) divisibility, (3) stability, (4) durability, and (5) uniqueness.

2.

In referring to the money supply, which of the following is money that can be accessed quickly and easily, and includes coins and paper money as well as checks?

  • M-1
  • M-2
  • M-3
  • M-4

M-1 is money that can be accessed quickly and easily. It includes coins and paper money, checks, and traveler’s checks.

3.

If the Fed were to increase the reserve requirement, which of the following would occur?

  • The reservation of promised capital would be reduced.
  • Banks would be required to increase the amount of money they physically keep in their vaults.
  • The funds cash flow requirement would significantly increase, which would increase the money supply.
  • The economy would stabilize and fall to zero inflation.

The reserve requirement is a percentage of commercial banks’ checking and savings accounts that must be physically kept in the bank. If the Fed were to increase the reserve requirement, then the banks would have to increase the amount of money that was physically kept in the bank, reducing the amount the banks could lend out. The money supply would be reduced and prices would likely fall.

4.

If the government or its representative agency were to take money out of the economy, which of the following might occur?

  • Prices would increase on the goods that remained for purchase.
  • Another Great Depression, and this is why governments do not take this action.
  • The unemployment rate in the economy would stabilize.
  • Prices would decrease on goods and services.

Similar to the supply and demand for other products and services, if money is removed from the economy, there is less to spend. Products and services that are already produced would lose value.

5.

When the Fed buys and sells U.S. government bonds in an effort to regulate the money supply, it is engaged in ________.

  • closed market practices
  • open-market operations
  • reserve equity strategy
  • federal fund rates adjustment

Open-market operations is the buying and selling of U.S. government bonds by the Fed with the goal of regulating the money supply. This is a very commonly used tool by the Federal Reserve System.

 

6.

If the economy of a nation such as Greece is faltering, the value of its associated currency, the euro, is likely to ____.

  • respond in the inverse. It will gain strength
  • not be affected due to all the other nations who also trade with this common currency
  • decline in strength as well
  • gain strength against economies whose economic strength is greater than Greece

The strength of an economy’s currency is positively correlated with the strength of the nation’s economy. It is likely that if Greece is having economic problems, the strength of the euro (as a member of the European Common Market) will also be affected.

7.

Too much money chasing too few goods is characterized by the term ________.

  • recession
  • inflation
  • deflation
  • monetary policy

The saying, “too much money chasing too few goods,” refers to a situation where there is full employment and people have more money to spend on available goods and services. The price of goods and services eventually increases to compensate for the high demand from consumers.

8.

An increase in the discount rate would have the effect of ________.

  • more people wanting to borrow money
  • more businesses wanting to borrow money
  • loosening of the money supply
  • tightening of the money supply

The discount rate is the interest rate the Fed charges its member banks when they borrow money from the Federal Reserve Bank. If the Fed decides to curb inflation and reduce the supply of money in the economy, it will increase the discount rate. Member banks will increase the rate they charge individuals and businesses for loans. Fewer loans will be issued. It will tighten the money supply.

9.

The bank failures of 1907 and the resulting cash shortage problems led to the creation of:

  • the Federal Reserve System.
  • the gold standard.
  • monetary policy.
  • the money supply.

The Federal Reserve System was formed in 1907 and under the Federal Reserve Act of 1913, all federally chartered banks had to join. The Fed became the bankers’ bank.

10.

The bank failures that were occurring in 1930s due to the effects of the Great Depression led to the creation of:

  • laws which prevented banks from failing.
  • the Federal Reserve System.
  • federal deposit insurance.
  • nonbanks.

One of the most important pieces of legislation to protect the banking industry was the passing of federal deposit insurance during the 1930s to further protect the public from bank failures.

 

 

11.

The technical name for a savings account is a:

  • demand deposit.
  • time deposit.
  • certificate of deposit.
  • deposit insurance.

A time deposit is the technical name for a savings account; the bank can require prior notice before the owner withdraws money from a time deposit.

12.

Competition between banks and nonbanks, such as insurance companies and pension funds, has:

  • decreased with the deregulation of the banking industry.
  • not changed in 50 years, since the creation of the Federal Reserve System.
  • increased significantly as nonbanks offer many of the services provided by regular banks.
  • stabilized with the economic crisis beginning in 2008.

Competition between banks and nonbanks has increased because nonbanks offer many of the services provided by regular banks.

13.

Which of the following organizations would be considered a nonbank institution?

  • Missouri Public School Retirement System
  • Educational Employees Credit Union
  • Heartland Bank
  • Southwest Savings Bank

Nonbanks are financial organizations that accept no deposits but offer many of the services provided by regular banks. Nonbanks include life insurance companies, pension funds, brokerage firms, commercial finance companies, and corporate financial services.

14.

Funds in savings and loan institutions are protected by:

  • Federal Deposit Insurance Corporation (FDIC).
  • National Credit Union Association (NCUA).
  • Federal Savings and Trust Association.
  • Savings Association Insurance Fund (SAIF).

The Savings Association Insurance Fund at one time was called the Federal Savings and Loan Insurance Corporation (FSLIC). In the 1980s to get more control over the banking system the government placed the FSLIC under the control of the FDIC and changed its name to the Savings Association Insurance Fund.

15.

Most commercial banks offer their depositors protection. At this time, bank deposits are insured by the FDIC (Federal Deposit Insurance Corporation) up to ________.

  • $100,000
  • $150,000
  • $250,000
  • $2,000,000

Currently, the FDIC insures each deposit for up to $250,000.

 

 

 

16.

One of the newest electronic conveniences is the ________, which can serve as a credit card, a debit card, and even unlock doors. RFID technology and GPS technology are used in some of these.

  • ATM
  • ETF
  • IMF
  • smart card

Smart cards serve as debit cards, credit cards, and as tools to unlock doors, pay bills, and more. Some are embedded with RFID technology or other chips that allow vendors to read balance amounts and other purchasing information.

17.

Online banking:

  • has grown unpopular and is not expected to grow much further.
  • allows customers to do all financial transactions from home at no cost.
  • has higher expenses because administrators of the online systems and software designers must be hired.
  • will most likely continue in financial institutions that offer traditional banking facilities as well as online services.

All top U.S. retail banks now allow customers to access their accounts online and most have bill-paying capabilities. It’s expected traditional banks will continue to offer both online services and brick-and-mortar facilities so customers can have the best of both possibilities.

18.

A ________ is a way of conducting business in global markets that promises a bank will pay some specified amount at a particular time, with no specific conditions imposed.

  • guarantee a certain exchange rate
  • letter of credit offer
  • banker’s acceptance
  • money exchange

A banker’s acceptance promises that the bank will pay some specified amount at a particular time.

19.

The ________ focuses on economic development throughout the world, with emphasis on emerging economies.

  • Federal Reserve Bank
  • International Monetary Fund
  • World Bank
  • Bank of the Americas

The World Bank is primarily responsible for financing economic development. It is also known as the International Bank for Reconstruction and Development.

20.

Cooperative monetary policies designed to stabilize currency exchanges among 188 countries are coordinated through which of the following organizations?

  • International Monetary Fund
  • International Banking Union
  • United Nations
  • NATO

The International Monetary Fund (IMF) was established to foster cooperative monetary policies that stabilize the exchange of one national currency for another.

 

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