Chapter 18 1 Large Business Firms Have Increased Their Reliance

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

Chapter 18: Understanding Money and Banking

1. Which of the following is a form of money?

a. Japanese yen

b. Bonds

c. A gold medallion

d. A Visa credit card

e. All of these are money

Difficulty: 2 Page-Reference: 576

Question ID: 18-1-01 Skill: Comprehension

Objective: 18.1

2. As early as ________ coins were being used, and paper money came into existence

around ________.

a. 600 BCE; 1200 CE

b. 1614; the later part of the 16th century

c. 1700; early 1800

d. 1900; 1930

e. 600; 1200

Difficulty: 3 Page-Reference: 576

Question ID: 18-1-02 Skill: Knowledge

Objective: 18.1

3. Wealth is

a. the value of everything you own.

b. the total amount of cash you hold.

c. how many children you have.

d. the total of all your savings.

e. the value of your portfolio.

Difficulty: 2 Page-Reference: 576

Question ID: 18-1-03 Skill: Knowledge

Objective: 18.1

4. Money is

a. credit cards.

b. tokens that represent a country’s resources that are accepted in every place of the world.

c. any object generally accepted by people as payment for goods and services.

d. a reward for an individual’s efforts.

e. wealth.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-04 Skill: Comprehension

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

5. The characteristics of money are

a. divisible, interchangeable, portable, and exchangeable.

b. durable, paper, coin, and stable.

c. interchangeable, divisible, paper, and banks.

d. durable, divisible, stable, and portable.

e. portable, divisible, durable, and interchangeable.

Difficulty: 2 Page-Reference: 576

Question ID: 18-1-05 Skill: Knowledge

Objective: 18.1

6. Modern paper currency is light and easy to handle, thus meeting the criterion of

a. portability.

b. durability.

c. divisibility.

d. valuable.

e. stability.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-06 Skill: Knowledge

Objective: 18.1

7. Since a salmon is large, bulky, and slippery, it fails to meet the money criterion of being

a. stable.

b. portable.

c. divisible.

d. durable.

e. valuable.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-07 Skill: Comprehension

Objective: 18.1

8. What caused the decline of barter as a means of obtaining something needed by a

consumer?

a. Development of the central bank

b. Discovery of gold

c. Invention of the credit card

d. The use of bonds

e. Introduction of money

Difficulty: 2 Page-Reference: 576

Question ID: 18-1-08 Skill: Comprehension

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

9. A dollar can be exchanged for four quarters, thus demonstrating that it is

a. durable.

b. stable.

c. divisible.

d. portable.

e. valuable.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-09 Skill: Knowledge

Objective: 18.1

10. Because the Canadian dollar varies only slightly over time in its ability to purchase goods,

it is considered

a. divisible.

b. stable.

c. valuable.

d. portable.

e. durable.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-10 Skill: Comprehension

Objective: 18.1

11. Depending on the time of the year, salmon may be in short supply. Thus, using salmon as

money violates the criterion of being

a. durable.

b. stable.

c. portable.

d. valuable.

e. divisible.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-11 Skill: Comprehension

Objective: 18.1

12. Different parts of the salmon are worth different amounts, thus violating the money

characteristic of being

a. durable.

b. stable.

c. divisible.

d. valuable.

e. portable.

Difficulty: 1 Page-Reference: 576

Question ID: 18-1-12 Skill: Comprehension

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

13. The expression “$1000 worth of clothes” represents

a. a unit of account.

b. a store of value.

c. a medium of exchange.

d. the stability of money.

e. the durability of money.

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-13 Skill: Knowledge

Objective: 18.1

14. If Chris takes the money from her paycheque and gives half of it to her landlord to pay

last month’s rent, how is she using the money?

a. As a unit of account

b. As a store of value

c. As a source of currency

d. As a medium of exchange

e. As a standard of value

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-14 Skill: Comprehension

Objective: 18.1

15. Without money, we would be bogged down in a system of barter. This illustrates the

________ function of money.

a. medium of exchange

b. unit of account

c. store of value

d. payment for labour

e. basis for banking system

Difficulty: 1 Page-Reference: 577

Question ID: 18-1-15 Skill: Knowledge

Objective: 18.1

16. Stephen got his paycheque on Friday. After a good time at the ballgame on Saturday, he

purchased some groceries, rented a video, and made his car payment. This illustrates the

________ function of money.

a. store of value

b. basis for banking system

c. medium of exchange

d. payment for labour

e. unit of account

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-16 Skill: Comprehension

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

17. Scott sneaked a peek at Laura’s paycheque. He discovered that she makes $200 a

month more than he does, and he concludes that her job must be more important than his. This

illustrates the ________ function of money.

a. store of value

b. medium of exchange

c. payment for labour

d. unit of account

e. basis for banking system

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-17 Skill: Comprehension

Objective: 18.1

18. If Sally says she has purchased $250.00 worth of groceries, she is referring to money as

a. a unit of account.

b. a method of divisibility.

c. a medium of exchange.

d. a store of value.

e. a measure of stability.

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-18 Skill: Comprehension

Objective: 18.1

19. Money lets you measure the relative values of goods and services. In so doing, money is

performing which of the following functions?

a. Store of value

b. Medium of exchange

c. Determination factor

d. Monetary flagging

e. Unit of account

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-19 Skill: Comprehension

Objective: 18.1

20. Ken and Tina have decided to put $10 in a jar every week until they have saved enough

to buy a new dining room set. How are they primarily using this money?

a. As a unit of account

b. As a store of value

c. As a source of currency

d. As a standard of value

e. As a medium of exchange

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-20 Skill: Comprehension

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

21. In 2011, what proportion of paper money in Canada was counterfeit?

a. 5 percent

b. 10 percent

c. 1 percent

d. 3 percent

e. less than one-tenth of one percent

Difficulty: 1 Page-Reference: 577

Question ID: 18-1-21 Skill: Knowledge

Objective: 18.1

22. In 2011, there were about 1.5 billion Bank of Canada notes in circulation, and about

_________ of these were counterfeit.

a. 10 000

b. 61 000

c. 52 000

d. 443 000

e. it is not known how many counterfeit notes are in circulation

Difficulty: 3 Page-Reference: 577

Question ID: 18-1-22 Skill: Knowledge

Objective: 18.1

23. An order instructing the bank to pay a given sum to a specified person or firm is

a. a time deposit.

b. currency.

c. a bank rate.

d. a term deposit.

e. a cheque.

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-23 Skill: Knowledge

Objective: 18.1

24. Which of the following influences the value of money?

a. The supply of money

b. Barter

c. Durability

d. Divisibility

e. Portability

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-24 Skill: Knowledge

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

25. Which of the following is contained in the M-1 measurement of the money supply?

a. The number of new automobiles produced in the nation

b. Currency and demand deposits

c. Credit card cash advances

d. The number of new homes started in the month

e. Time deposits

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-25 Skill: Knowledge

Objective: 18.1

26. As of November 2011, the value of M-2 was $________.

a. 134.5 million

b. 843.5 million

c. 400 billion

d. 796 billion

e. 1.1 trillion

Difficulty: 3 Page-Reference: 578

Question ID: 18-1-26 Skill: Knowledge

Objective: 18.1

27. A demand deposit is

a. the same as a time deposit.

b. a chequing account.

c. one that remains with the bank for a specified period of time.

d. the same as a regular savings account.

e. the least important type of money in our economic system.

Difficulty: 1 Page-Reference: 577

Question ID: 18-1-27 Skill: Knowledge

Objective: 18.1

28. Which of the following is not part of the M-1 money supply?

a. Credit cards

b. Currency

c. Demand deposits

d. Cheques

e. All of these

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-28 Skill: Comprehension

Objective: 18.1

29. Demand deposits include

a. money in chequing accounts.

b. time deposits.

c. savings accounts.

d. money market mutual funds.

e. credit cards.

Difficulty: 2 Page-Reference: 577

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

Question ID: 18-1-29 Skill: Knowledge

Objective: 18.1

30. Which of the following accounts for nearly all of Canada’s money supply?

a. M-1

b. Currency

c. Demand deposits

d. Currency plus demand deposits

e. M-2

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-30 Skill: Knowledge

Objective: 18.1

31. Which of the following is not in the M-2 measurement of the money supply?

a. Currency

b. Time deposits

c. Chequing accounts

d. Money owed on credit cards

e. Money market mutual funds

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-31 Skill: Comprehension

Objective: 18.1

32. Money held by a financial institution that requires notice prior to making a withdrawal and

that cannot be transferred to others by a written cheque is known as

a. money market funds and accounts.

b. time deposits.

c. currency.

d. certified holdings.

e. demand deposits.

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-32 Skill: Knowledge

Objective: 18.1

33. ________ are operated by investment companies that bring together pools of assets from

many investors and purchase a collection of short-term, low-risk financial securities.

a. All mutual funds

b. Global development funds

c. Money market mutual funds

d. Schedule B Banks

e. Pension funds

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-33 Skill: Knowledge

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

34. Which of the following is contained in the M-1 measurement of the money supply?

a. The number of new automobiles produced in the nation in the previous month

b. The number of new homes started in the month

c. Time deposits

d. Credit card balances

e. Cash and the money in chequing accounts

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-34 Skill: Comprehension

Objective: 18.1

35. Joanne has money in a ___________; this requires notice prior to making a withdrawal

and cannot be transferred to others by a written cheque.

a. demand deposit

b. money market fund

c. cookie jar

d. certified cheque

e. time deposit

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-35 Skill: Comprehension

Objective: 18.1

36. Which of the following is not included in either M-1 or M-2?

a. CDs

b. Time deposits

c. Savings accounts

d. Credit cards

e. Chequing accounts

Difficulty: 1 Page-Reference: 577-578

Question ID: 18-1-36 Skill: Comprehension

Objective: 18.1

37. Joe is a research economist for the Royal Bank. His most reliable measure of money

would be

a. currency plus demand deposits.

b. M-2.

c. demand deposits.

d. M-1.

e. currency.

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-37 Skill: Comprehension

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

38. Canadian Heritage, an investment company that groups together pools of assets, showed

an average return of 44% for the last three months. Canadian Heritage set up ________ for its

investors.

a. time deposits

b. money market mutual funds

c. demand deposits

d. hedge funds

e. term deposits

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-38 Skill: Comprehension

Objective: 18.1

39. The value of goods bought with credit cards in Canada in 2012 was

a. $500 million.

b. $1 billion.

c. $100 billion.

d. 300 billion.

e. $1 trillion.

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-39 Skill: Knowledge

Objective: 18.1

40. All of the following is true about credit cards except

a. credit cards are a store of value.

b. credit cards are quite convenient.

c. 2 to 5 percent of total credit-sales dollars goes to card issuers.

d. credit cards serve as a temporary medium of exchange.

e. credit cards are extremely profitable for issuing companies.

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-40 Skill: Comprehension

Objective: 18.1

41. Which of the following is correct regarding credit cards?

a. They are a store of value.

b. They are not a money substitute.

c. They are a permanent medium of exchange.

d. They are becoming more important but are still not a major factor in the purchase of

consumer goods.

e. They are often referred to as “plastic money.”

Difficulty: 2 Page-Reference: 578

Question ID: 18-1-41 Skill: Knowledge

Objective: 18.1

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

42. In 2011, credit card fraud cost financial institutions about $_________.

a. 5 million

b. 37 million

c. 366 million

d. 529 million

e. 1.2 billion

Difficulty: 3 Page-Reference: 578

Question ID: 18-1-42 Skill: Knowledge

Objective: 18.1

43. Experts are increasingly sounding a warning about mounting credit card debt. Given that,

which of the following would be an unwise strategy for a credit card company?

a. Making sure the company’s credit card rules are clear and easy to understand.

b. Charging the same interest rate as other credit card companies.

c. Ensuring that fees for exceeding credit limits are no higher than necessary.

d. Increasing the value of the promotional items that are used to attract new credit card

customers.

e. Offering free debt counselling to credit card customers.

Difficulty: 3 Page-Reference: 578

Question ID: 18-1-43 Skill: Application

Objective: 18.1

44. Which of the following is not one of the traditional “four financial pillars“?

a. Investment dealers

b. Life insurance companies

c. Credit card companies

d. Trust companies

e. Chartered banks

Difficulty: 1 Page-Reference: 579

Question ID: 18-1-44 Skill: Knowledge

Objective: 18.2

45. The main function of financial institutions is to

a. offer trust services.

b. create money.

c. provide loans to small businesses.

d. offer chequing and savings accounts.

e. facilitate the flow of money from sectors with surpluses to those with deficits.

Difficulty: 2 Page-Reference: 579

Question ID: 18-1-45 Skill: Knowledge

Objective: 18.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

46. Deregulation of banks has caused banks to ________.

a. decrease the amount of funds they lend to small business

b. abandon plans for expansion into foreign markets

c. stop issuing commercial paper

d. increase their level of foreign ownership

e. diversify to provide a wider array of financial products to their clients

Difficulty: 2 Page-Reference: 580

Question ID: 18-1-46 Skill: Knowledge

Objective: 18.2

47. Which of the following changes have occurred in banking because of deregulation?

a. Large business firms have increased their reliance on bank loans.

b. Banks can now make whatever profits they can manage.

c. Banks are providing a narrower and more highly focused array of financial products to their

customers than they did before deregulation.

d. Banks have increased the training given to employees.

e. Bank profits are now being sent to foreign financial companies.

Difficulty: 2 Page-Reference: 580

Question ID: 18-1-47 Skill: Comprehension

Objective: 18.2

48. Which of the following is correct with regard to recent changes in banking in Canada?

a. Banks are increasingly focusing on their role as intermediaries between depositors and

borrowers.

b. Consumers are turning to electronic banks like President’s Choice Financial.

c. Rather than making most of their profit from investment banking fees, banks now make most

of their money from the spread between interest rates paid to depositors and the rates charged

on loans.

d. During the last few years, large companies have increased their reliance on bank loans.

e. U.S. and other foreign banks are not allowed to do business in Canada.

Difficulty: 2 Page-Reference: 580

Question ID: 18-1-48 Skill: Comprehension

Objective: 18.2

49. Which of the following might the Bank of Canada do to increase the money supply?

a. Sell government securities

b. Increase the bank rate

c. Impose a new tax

d. Buy government securities

e. Increase the reserve rate

Difficulty: 3 Page-Reference: 582

Question ID: 18-1-49 Skill: Application

Objective: 18.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

50. Which of the following will result in an decrease of the money supply?

a. An increase in taxes

b. Purchase of securities by the Bank of Canada

c. A decrease in the bank rate

d. An increase in the discount rate

e. A decrease in reserve requirements

Difficulty: 3 Page-Reference: 582

Question ID: 18-1-50 Skill: Application

Objective: 18.2

51. The interest rate at which chartered banks can borrow from the Bank of Canada is the

a. preferred rate.

b. prime rate.

c. prime plus 1 percent.

d. bond rate.

e. bank rate.

Difficulty: 2 Page-Reference: 582

Question ID: 18-1-51 Skill: Knowledge

Objective: 18.2

52. The main purpose of the Bank of Canada is to

a. set prime interest rates.

b. assist in the merger of troubled banks with healthier institutions.

c. bail out banks like the Northland and CCB.

d. deregulate the banking industry.

e. control the nation’s money supply.

Difficulty: 2 Page-Reference: 582

Question ID: 18-1-52 Skill: Knowledge

Objective: 18.2

53. When the Bank of Canada wants to slow down business activity and decrease the money

supply, it

a. lowers the bank rate.

b. lowers the reserve requirement.

c. decreases government spending.

d. buys government securities.

e. raises the bank rate.

Difficulty: 2 Page-Reference: 582

Question ID: 18-1-53 Skill: Application

Objective: 18.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

54. When the Bank of Canada wants to stimulate business activity and increase the money

supply, it

a. buys government securities.

b. raises the reserve requirement.

c. decreases government spending.

d. raises the bank rate.

e. does none of these things.

Difficulty: 2 Page-Reference: 582

Question ID: 18-1-54 Skill: Application

Objective: 18.2

55. If the Bank of Canada wants to decrease the money supply, it can _________; if it wants

to increase the money supply, it can ____________.

a. sell government securities; buy government securities

b. raise the bank rate; buy government securities

c. increase the value of the Canadian dollar; decrease the value of the Canadian dollar

d. lower the bank rate; sell government securities

e. buy government securities; sell government securities

Difficulty: 3 Page-Reference: 582

Question ID: 18-1-55 Skill: Application

Objective: 18.2

56. When the Bank of Canada wants to increase the money supply, it

a. raises the reserve requirement.

b. sells government securities.

c. buys government securities.

d. increase the bank rate.

e. allows more credit cards to be produced.

Difficulty: 2 Page-Reference: 582

Question ID: 18-1-56 Skill: Application

Objective: 18.2

57. When the Bank of Canada wants to decrease the money supply, it

a. raises the reserve requirement.

b. sells government securities.

c. buy government securities.

d. decrease the bank rate.

e. allows fewer credit cards to be produced.

Difficulty: 2 Page-Reference: 582

Question ID: 18-1-57 Skill: Application

Objective: 18.2

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

58. Which of the following is correct with regard to Canadian banks?

a. They may not provide financing to small businesses.

b. They are not allowed to sell shares of stock to the general public.

c. They may provide insurance services, but not in their bank branches .

d. They are protected from competition from foreign-controlled banks.

e. All of these.

Difficulty: 3 Page-Reference: 580

Question ID: 18-1-58 Skill: Comprehension

Objective: 18.3

59. Which of the following is correct with regard to the Canadian banking system?

a. It is very similar to that in the U.S., where there are many different banks, each with just a

few branches.

b. The five largest Canadian banks account for about 50 percent of total bank assets.

c. Schedule A banks are those that are Canadian-owned and have no more than 10 percent of

voting shares controlled by a single interest.

d. Because there a just a few large banks, banking is not very competitive in Canada.

e. Banks perform largely a storage function for money, and they do not generally help their

customers manage their money.

Difficulty: 2 Page-Reference: 583

Question ID: 18-1-59 Skill: Comprehension

Objective: 18.3

60. ________ is a revolutionary way of using electronic money over the internet. Traditional

currency is used to buy electronic money that is then used to shop online.

a. The debit card

b. Ecash

c. The ecard

d. The NetCash card

e. The smart card

Difficulty: 2 Page-Reference: 586

Question ID: 18-1-60 Skill: Knowledge

Objective: 18.3

61. Which of the following is a potential problem with ecash?

a. Hackers may break in.

b. Regulation and control are virtually non-existent.

c. There is no protection like that which covers government–controlled money systems.

d. A computer crash could wipe out an account forever.

e. All of these are potential problems.

Difficulty: 2 Page-Reference: 586

Question ID: 18-1-61 Skill: Comprehension

Objective: 18.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

62. A ________ is a privately owned, profit-seeking firm that serves individuals, non-business

organizations, and businesses as a financial intermediary.

a. pension fund

b. credit union

c. chartered Bank

d. trustee

e. trust company

Difficulty: 2 Page-Reference: 583

Question ID: 18-1-62 Skill: Knowledge

Objective: 18.3

63. Which of the following statements about chartered banks is false?

a. A chartered bank is privately owned.

b. A chartered bank is profit-seeking.

c. Chartered banks are the main source of short-term loans for businesses.

d. A chartered bank is required to use funds obtained from savers to purchase portfolios of

government bonds.

e. A chartered bank serves individuals, non-business organizations, and businesses as a

financial intermediary.

Difficulty: 2 Page-Reference: 583

Question ID: 18-1-63 Skill: Comprehension

Objective: 18.3

64. The principal source of short-term loans for business firms is

a. contractual savings institutions.

b. trust companies.

c. chartered banks.

d. investment companies.

e. loans from relatives of the owners.

Difficulty: 1 Page-Reference: 583

Question ID: 18-1-64 Skill: Knowledge

Objective: 18.3

65. The largest Canadian bank in terms of revenue is the

a. Canadian Imperial Bank of Commerce (CIBC)

b. Bank of Montreal

c. Royal Bank of Canada

d. Bank of Nova Scotia

e. Toronto Dominion Bank (TD)

Difficulty: 2 Page-Reference: 584

Question ID: 18-1-65 Skill: Knowledge

Objective: 18.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

66. What term identifies a bank’s promise to pay a foreign business firm (e.g., a German firm)

a certain amount if specified conditions are met?

a. Bank loan

b. Letter of credit

c. Promissory note

d. Deposit

e. Electronic funds transfer

Difficulty: 2 Page-Reference: 585

Question ID: 18-1-66 Skill: Knowledge

Objective: 18.3

67. Chartered banks offer which of the following services?

a. foreign exchange

b. automated teller machines

c. chequing accounts

d. debit and credit cards

e. all of these

Difficulty: 2 Page-Reference: 585

Question ID: 18-1-67 Skill: Comprehension

Objective: 18.3

68. When a business has a secured loan and is unable to pay the loan back, a bank may

a. take back the loan.

b. allow them two years to come up with the money to pay back the loan.

c. confiscate and sell the collateral that was put up for the loan.

d. make them work at the bank until they have made enough money to pay back the loan.

e. do nothing.

Difficulty: 1 Page-Reference: 587

Question ID: 18-1-68 Skill: Knowledge

Objective: 18.3

69. The prime rate of interest is the rate charged

a. on time deposits.

b. on consumer installment loans.

c. to major business customers.

d. on mortgages.

e. to the most risky borrowers.

Difficulty: 1 Page-Reference: 587

Question ID: 18-1-69 Skill: Knowledge

Objective: 18.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

70. Which of the following is not a form of electronic technology for banking?

a. Direct withdrawals

b. Pay-by-phone systems

c. Personal cheques

d. Smart card

e. Direct deposits

Difficulty: 2 Page-Reference: 585-586

Question ID: 18-1-70 Skill: Comprehension

Objective: 18.3

71. A plastic card that allows an individual to transfer money between bank accounts is a(n)

a. smart card.

b. ecard.

c. NetCash.

d. ecash.

e. debit card.

Difficulty: 1 Page-Reference: 585

Question ID: 18-1-71 Skill: Knowledge

Objective: 18.3

72. When a bank makes your monthly bill payments and manages your investment portfolio,

this is known as

a. a trust service.

b. a smart card.

c. an ABM.

d. a direct deposit.

e. a point-of-sale transfer.

Difficulty: 2 Page-Reference: 584

Question ID: 18-1-72 Skill: Knowledge

Objective: 18.3

73. Terri will be going to Ireland next week. She would be wise to arrange for a(n) ________

prior to leaving so that she can withdraw cash and transfer money between bank accounts on her

trip.

a. ecard

b. smart card

c. debit card

d. NetCash

e. ecash

Difficulty: 1 Page-Reference: 585

Question ID: 18-1-73 Skill: Comprehension

Objective: 18.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

74. A debit card

a. is an identification card issued by a credit union to its members who must present the

card when conducting business at the credit union.

b. allows the user to move money via digital electronic transmissions.

c. permits the holder to transfer money from his/her chequing account to the store’s account.

d. permits the holder to purchase a product and to pay for it later.

e. is an identification card issued by a consumer finance company to its members who must

present the card when conducting business at the company.

Difficulty: 2 Page-Reference: 585

Question ID: 18-1-74 Skill: Knowledge

Objective: 18.3

75. A(n) ________ card is a credit card-sized computer that can be programmed with

“electronic money.”

a. e–

b. ecash

c. debit

d. smart

e. NetCash

Difficulty: 2 Page-Reference: 585

Question ID: 18-1-75 Skill: Knowledge

Objective: 18.3

76. What term identifies a bank’s promise to pay a specified amount of money at a future

date?

a. Bankers’ acceptance

b. Electronic funds transfer

c. Promissory note

d. Bank loan

e. Letter of credit

Difficulty: 2 Page-Reference: 585

Question ID: 18-1-76 Skill: Knowledge

Objective: 18.3

77. Cynthia is genuinely concerned about electronic money because

a. power failures cause information to be lost.

b. hackers may break into ecash systems and steal the money in them.

c. there are extensive rules and regulations dealing with emoney.

d. electronic money generates an extremely large amount of paper.

e. banks will generally not recognize this form of money.

Difficulty: 2 Page-Reference: 586

Question ID: 18-1-77 Skill: Comprehension

Objective: 18.3

Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang

Chapter 18—Understanding Money and Banking

78. Sally opened a small boutique; unfortunately, she had no credit and her suppliers wished

to be paid immediately. Sally did not like to carry cash, so she paid by

a. writing cheques on her term deposit account.

b. writing cheques on her demand deposit account.

c. using a banker’s acceptance.

d. writing a promissory note.

e. using a letter of credit.

Difficulty: 2 Page-Reference: 577

Question ID: 18-1-78 Skill: Comprehension

Objective: 18.3

79. What is “ecash”?

a. The same thing as a demand deposit

b. Money that moves along multiple channels of consumers and businesses via digital

electronic transmissions

c. A type of plastic money that immediately reduces the balance in the user’s bank account

when it is used

d. An electronic purse that can be programmed with electronic money at ATM machines

e. None of these

Difficulty: 2 Page-Reference: 586

Question ID: 18-1-79 Skill: Knowledge

Objective: 18.3

80. Which of the following is correct regarding ecash?

a. It is part of the established network of banks, cheques, and paper currency.

b. Ecash transactions are more expensive than handling cheques and paper records.

c. Ecash can be lost if the issuer’s computer system crashes and the money that is “banked” in

memory is lost.

d. Tight controls over ecash have been established to prevent hackers from stealing the

money.

e. Ecash can be purchased only from banks.

Difficulty: 2 Page-Reference: 586

Question ID: 18-1-80 Skill: Comprehension

Objective: 18.3

81. Jack is one of the bank’s most creditworthy customers. The interest rate available to Jack

is the

a. reserve requirement rate.

b. overnight rate.

c. prime rate.

d. discount rate.

e. rediscount rate.

Difficulty: 2 Page-Reference: 587

Question ID: 18-1-81 Skill: Comprehension

Objective: 18.3