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Multiple Choice



1

Which item below is not one of the five parts of the Financial System?
A)Money.
B)Central banks.
C)Financial Markets
D)Financial Institutions.
E)Credit cards.
2

The five core principles of Money and Banking include each of the following except?
A)All people act rationally.
B)Time has value.
C)Information is the basis for decisions.
D)Risk requires compensation.
E)Markets set prices and allocate resources.
3

The statement "risk requires compensation" implies:
A)People only accept risk when they absolutely have to.
B)People will only accept risk when they are rewarded for doing so.
C)People do not take risk.
D)People will pay to avoid risk.
E)b and d
4

Banks usually offer lower rates of interest to people willing to keep their funds in the bank for a short time because:
A)The banks really do not want these people as customers.
B)Banks really do not want a lot of people coming into the bank.
C)Bankers realize time has value and people need to be compensated if they are to keep their money in the bank longer.
D)All of the above
5

In the United States control of the money supply is given to:
A)The President.
B)Congress.
C)The Secretary of the Treasury.
D)The Federal Reserve.
E)None of the above
6

Which of the following statements best describes financial markets?
A)Financial markets raise the cost and increase the speed of buying and selling financial instruments since people are earning fees for these transactions.
B)Financial markets increase the speed of buying and selling, and they also decrease the cost.
C)Financial markets are a good example of unregulated markets.
D)b and c
7

The New York Stock Exchange is an example of:
A)A financial instrument.
B)A central bank.
C)A financial market
D)All of the above
8

When an individual obtains a student loan and makes all of the regular monthly payments, the sum of the payments made will exceed the initial amount of the loan. This is due primarily to the core principle:
A)Most people do not pay back student loans.
B)Time has value
C)Markets are sometimes inefficient at allocating resources.
D)Information is the basis for decisions.
E)Stability improves welfare.
9

Monetary policy is best described as:
A)Attempts to keep inflation constant.
B)Determining the denominations and supply of a country's currency.
C)One of the most important functions of Congress.
D)Attempts to keep inflation low and stable and growth high and stable.
10

The core principles of money and banking would imply that if more students didn't pay back their student loans:
A)Student loans may become more difficult to obtain.
B)The interest rate on student loans would increase.
C)Fewer people may attend college.
D)All of the above.





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