Money and Banking: Master the Fundamentals of Finance

Question 1

Which type of money is backed by a physical commodity, such as gold or silver?

Accepted Answer

Commodity money

Answer

Representative money

Answer

Fiat money

Answer

Digital currency

Question 2

Which of the following is the primary tool used by the Federal Reserve to increase the money supply?

Accepted Answer

Open market operations

Answer

Reserve requirements

Answer

Discount rate

Answer

Moral suasion

Question 3

What is the primary objective of the Federal Reserve's monetary policy?

Accepted Answer

Control inflation

Answer

Maximize economic growth

Answer

Minimize unemployment

Answer

Stabilize the financial system

Question 4

Which of the following is NOT an advantage of using electronic money?

Accepted Answer

Increased privacy

Answer

Convenience

Answer

Security

Answer

Reduced transaction costs

Question 5

What is the main distinction between a bank and a non-bank financial institution?

Accepted Answer

Banks accept demand deposits, while non-bank financial institutions do not.

Answer

Non-bank financial institutions are more heavily regulated than banks.

Answer

Banks lend money to businesses and consumers, while non-bank financial institutions do not.

Answer

Non-bank financial institutions offer a wider range of financial services than banks.

Question 6

What is the primary role of the Federal Deposit Insurance Corporation (FDIC)?

Accepted Answer

To insure deposits in banks

Answer

To regulate banks

Answer

To provide loans to banks

Answer

To set interest rates

Question 7

Which type of money is created without being backed by a physical asset or commodity?

Accepted Answer

Fiat money

Answer

Commodity money

Answer

Representative money

Answer

Credit money

Question 8

Which of the following is NOT a tool of monetary policy used by the Federal Reserve?

Accepted Answer

Fiscal policy

Answer

Open market operations

Answer

Reserve requirements

Answer

Interest rate targeting

Question 9

What type of money is not backed by any physical commodity and relies solely on the trust in the issuing government?

Accepted Answer

Fiat money

Answer

Commodity money

Answer

Representative money

Answer

Electronic money

Question 10

According to the Federal Reserve Act of 1913, which institution is responsible for setting monetary policy in the United States?

Accepted Answer

The Federal Reserve

Answer

The President

Answer

The Congress

Answer

The Treasury Department

Question 11

Which of these is NOT a tool of monetary policy used by the Federal Reserve?

Accepted Answer

Fiscal policy

Answer

Open market operations

Answer

Reserve requirements

Answer

Discount rate

Question 12

Describe the relationship between the money supply and inflation. How are they related?

Accepted Answer

Positive relationship

Answer

Negative relationship

Answer

No relationship

Answer

It depends on specific economic conditions

Question 13

Which of the following is NOT a primary function of money?

Accepted Answer

Source of income

Answer

Medium of exchange

Answer

Store of value

Answer

Unit of account

Question 14

Which type of money is created digitally by banks and facilitates electronic transactions?

Accepted Answer

Digital currency

Answer

Commodity money

Answer

Fiat money

Answer

Reserve money

Question 15

Which U.S. institution is primarily responsible for setting monetary policy?

Accepted Answer

The Federal Reserve

Answer

The Treasury Department

Answer

The President

Answer

The Congress

Question 16

What is the primary tool employed by the Federal Reserve to implement monetary policy?

Accepted Answer

Open market operations

Answer

Changes in bank reserve requirements

Answer

Fiscal policy

Answer

Direct lending

Question 17

What is the term for the minimum level of reserves that banks are required to hold?

Accepted Answer

Reserve requirement

Answer

Discount rate

Answer

Federal funds rate

Answer

Monetary base

Question 18

Which of the following is a primary benefit of central bank independence?

Accepted Answer

Reduced political influence on monetary policy

Answer

Guaranteed low inflation

Answer

Increased government spending

Answer

Lower unemployment rates

Question 19

What is the main purpose of a monetary policy rule?

Accepted Answer

To establish a framework for monetary policy decisions

Answer

To ensure rapid economic growth

Answer

To regulate commercial banks

Answer

To predict future inflation rates

Question 20

What economic theory posits a direct relationship between the money supply and inflation?

Accepted Answer

Quantity theory of money

Answer

Monetary equation

Answer

Phillips curve

Answer

Liquidity trap

Question 21

In the financial system, what is the primary function of financial intermediaries, such as banks and credit unions?

Accepted Answer

To facilitate the transfer of funds between savers and borrowers

Answer

To regulate the amount of money in circulation

Answer

To provide protection against financial risks and uncertainties

Answer

To control the government's fiscal policies

Question 22

Which of the following is not a characteristic of money?

Accepted Answer

Tangible commodity

Answer

Medium of exchange

Answer

Store of value

Answer

Unit of account

Question 23

The central bank of the United States is the:

Accepted Answer

Federal Reserve System

Answer

International Monetary Fund

Answer

Treasury Department

Answer

Securities and Exchange Commission

Question 24

Which of the following is a tool utilized by the Federal Reserve to regulate the money supply?

Accepted Answer

Open market operations

Answer

Fiscal policy

Answer

Taxation

Answer

Government spending

Question 25

The primary responsibility of the Federal Open Market Committee (FOMC) is to:

Accepted Answer

Set interest rates

Answer

Control inflation

Answer

Manage foreign exchange reserves

Answer

Regulate the banking industry

Question 26

Which of the following is an advantage of using electronic currency over physical currency?

Accepted Answer

Reduced transaction costs

Answer

Increased security

Answer

Easier to counterfeit

Answer

Less convenient

Question 27

The quantity theory of money suggests that:

Accepted Answer

The price level is directly proportional to the money supply

Answer

The price level is inversely proportional to the money supply

Answer

The price level is unrelated to the money supply

Answer

The price level is dependent on the level of economic growth

Question 28

Which of the following types of monetary policy is designed to stimulate economic growth?

Accepted Answer

Expansionary policy

Answer

Contractionary policy

Answer

Fiscal policy

Answer

Structural policy

Question 29

The Phillips curve illustrates the relationship between:

Accepted Answer

Inflation and unemployment

Answer

Inflation and interest rates

Answer

Unemployment and economic growth

Answer

Interest rates and money supply

Question 30

Which of the following is NOT a primary function of money in an economy?

Accepted Answer

Legal tender

Answer

Medium of exchange

Answer

Store of value

Answer

Unit of account

Question 31

Which type of money is not backed by a physical commodity or intrinsic value?

Accepted Answer

Fiat money

Answer

Electronic money

Answer

Representative money

Answer

Commodity money

Question 32

Which of the following is NOT a tool of monetary policy employed by the Federal Reserve?

Accepted Answer

Fiscal policy

Answer

Quantitative easing

Answer

Open market operations

Answer

Reserve requirements

Question 33

What is the primary mandate of monetary policy?

Accepted Answer

Maintain price stability and promote sustainable economic growth

Answer

Reduce unemployment solely

Answer

Increase exports exclusively

Question 34

Which of the following is a key determinant of the demand for money?

Accepted Answer

Transaction demand for goods and services

Answer

Inflation expectations exclusively

Answer

Interest rates only

Answer

Government spending solely

Question 35

Which of the following is a criticism of using the Consumer Price Index (CPI) to measure inflation?

Accepted Answer

It potentially overstates inflation due to substitution bias

Answer

It is based on a biased sample

Answer

It is excessively volatile

Answer

It understates inflation due to quality improvements only

Question 36

What is the primary responsibility of the Federal Open Market Committee (FOMC)?

Accepted Answer

Sets short-term interest rates and conducts open market operations

Answer

Provides direct loans to businesses

Answer

Regulates commercial banks solely

Answer

Prints currency exclusively

Question 37

Which of the following is a potential negative consequence of deflation?

Accepted Answer

Reduced investment and economic growth

Answer

Increased consumer spending

Answer

Rising inflation

Question 38

What is the primary purpose of a central bank's balance sheet?

Accepted Answer

To record the bank's assets and liabilities, providing insights into its financial position and monetary policy operations

Answer

To solely regulate commercial banks

Answer

To primarily print currency

Answer

To exclusively set interest rates

Question 39

Which type of money is created when banks lend out more money than they hold in deposits?

Accepted Answer

Demand Deposits

Answer

Commodity Money

Answer

Fiat Money

Answer

Representative Money

Question 40

Who is responsible for conducting monetary policy in the United States?

Accepted Answer

Federal Reserve System

Answer

Department of the Treasury

Answer

Securities and Exchange Commission

Question 41

What is the primary goal of an expansionary monetary policy?

Accepted Answer

Stimulate economic growth

Answer

Stabilize exchange rates

Answer

Curb inflation

Answer

Prevent recession

Question 42

How does the monetary base differ from the money supply?

Accepted Answer

The monetary base is a narrower measure of money than the money supply

Answer

The monetary base is only used by banks

Answer

The monetary base and the money supply are equal

Answer

The monetary base is a broader measure of money than the money supply

Question 43

Which of the following is NOT a type of depository financial institution?

Accepted Answer

Insurance Company

Answer

Credit Union

Answer

Commercial Bank

Answer

Savings and Loan Association

Question 44

What is the purpose of a reserve requirement?

Accepted Answer

To ensure banks have sufficient funds to meet customer withdrawals

Answer

To control the amount of money in circulation

Answer

To prevent banks from making risky investments

Question 45

Which of the following describes the function of money that enables it to retain value over time?

Accepted Answer

Store of value

Answer

Unit of account

Answer

Store of equity

Answer

Medium of exchange

Question 46

In the United States, what is the primary form of money used in most transactions?

Accepted Answer

Fiat money

Answer

Representative money

Answer

Electronic money

Answer

Commodity money

Question 47

Which institution is legally responsible for conducting monetary policy in the United States?

Accepted Answer

Federal Reserve System

Answer

International Monetary Fund

Answer

Department of the Treasury

Answer

Congress

Question 48

Which of the following is the primary monetary policy tool employed by the Federal Reserve to influence the money supply?

Accepted Answer

Open market operations

Answer

Taxation

Answer

Reserve requirements

Answer

Discount rate

Question 49

Which of the following is a potential negative consequence if the Federal Reserve pursues an overly expansionary monetary policy?

Accepted Answer

Inflation

Answer

Economic growth

Answer

Deflation

Answer

High unemployment

Question 50

What is the central role of commercial banks within the financial system?

Accepted Answer

Provide loans and facilitate платежи

Answer

Set interest rates

Answer

Issue currency

Answer

Manage fiscal policy

Question 51

What is the primary purpose of a fractional reserve banking system?

Accepted Answer

To expand the money supply

Answer

To promote economic growth

Answer

To control inflation

Answer

To reduce the risk of bank runs

Question 52

Which of the following economic indicators measures the overall price level of goods and services in an economy?

Accepted Answer

Consumer Price Index (CPI)

Answer

Unemployment rate

Answer

Interest rate

Answer

Gross Domestic Product (GDP)

Question 53

What is the primary objective of monetary policy in most developed economies?

Accepted Answer

Price stability

Answer

High employment

Answer

Economic growth

Answer

Financial stability