question

One of the most important aspects of the banking legislation passed during the 1930's established:

answer

Federal deposit insurance

question

The problem with bartering is:

answer

it is not an easy process, and often cumbersome to carry goods to the place of trade.

question

What represents an independent agency of the U.S. government that insures bank deposits?

answer

Federal Deposit Insurance Corporation

question

The technical name for a savings account is a:

answer

time deposit

question

The organization responsible for conducting monetary policy in the United States is the:

answer

Federal Reserve System

question

6. Chipper's Golf Resort plans to use famous Kauri wood from New Zealand for parts of the interior of the magnificent club house at its new golf resort near Portland, OR. According to the importer, each ten foot slab will cost Chipper's approximately $5,000. Looking at the exchange rates, Chipper's finance director noted that $500 US dollars = $738 NZ dollars. The importer will order directly from his source in New Zealand. Chipper's finance director has determined that: A. it's not a good time to buy the wood. B. it's a good time to buy the wood. C. there will be a shortage of the wood. D. it will cost less when the exchange rate of U.S. dollars to NZ dollars is just about equal.

answer

B. it's a good time to buy the wood.

question

A few retailers enable their customers to pay for gas by using ________ card that electronically transmits information through an embedded.

answer

smart

question

8. The Bank of Bramblewood would like to increase its loans to customers, but it is currently mandated by a high reserve rate. As a Federal Reserve member bank, it will borrow additional funds from the Fed and charge its customers an interest rate that is higher than the ________________.

answer

discount rate

question

According to the Reaching Beyond our Borders box, titled \"The Banking Crisis Goes Global\", China:

answer

permitted banks (as in other nations) to operate independently from the government. Banks refused to lend small businesses, resulting in several thousand going bankrupt in 2008.

question

What replaced the typical magnetic strip on a credit or debit card with a microprocessor?

answer

Smart cards

question

What accepts savings and checking account deposits and provides home mortgage loans?

answer

savings and loan association

question

What insures deposits held in credit unions?

answer

National Credit Union Administration (NCUA)

question

The FDIC insures individual accounts in member institutions up to a maximum of ___________, and temporarily, it increased the maximum level to ____________, through December 31, 2009.

answer

$100,000; $250,000

question

The Fed bought several billion dollars worth of U.S. government securities. The purpose of this action is to:

answer

stimulate the economy by increasing the amount of money in circulation.

question

The Fed announces that it intends to implement policies to increase interest rates. What will most likely result of higher U.S. interest rates?

answer

more money will flow into the United States from foreign investors

question

First Data Corporation has developed the Go-Tag, where:

answer

a small chip that is attached to a cell phone or smaller card such as a badge that can make a transaction from one account to another without the need to swipe the card

question

Bob read a newspaper story that indicated a dramatic increase in money market accounts and certificates of deposit during the last three months. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Bob can conclude that for the past quarter:

answer

The M-2 money supply has increased, but the M-1 money supply was stable

question

What is included in the M-2 definition of the money supply but not the M-1 definition?

answer

savings account deposits

question

Traditionally, banks provide loans to individuals and companies according to the recipient's ___________.

answer

creditworthiness

question

Patty supports a sustainability initiative at her bank to be paperless. Each time the bank issues checks or sends out a paper statement, it includes a promotion asking customers to support methods that eliminates paperwork. She encourages customers to use debit cards, smart cards, direct deposit and direct payments, as well as online statement retrieval. All of these tools are used in conjunction with the bank's ________________.

answer

electronic funds transfer system

question

A time deposit that earns interest is a __________.

answer

Certificate of Deposit

question

Critics of the World Bank charge the organization with:

answer

financing projects that damage the ecosystem

question

Who persuaded Congress to establish the first central bank in the United States?

answer

Alexander Hamilton

question

Originally, savings and loan associations:

answer

promoted consumer thrift and home ownership

question

When the Fed increases the discount rate, banks:

answer

must pay a higher rate when they borrow from the Fed

question

What plays a role in making certain that checks clear, and sellers get paid?

answer

Federal Reserve System

question

The Federal Reserve represents a \"banker's bank\" because:

answer

it holds the deposits of commercial banks and makes loans to banks that need additional funds

question

Commercial banks, savings and loan associations, and credit unions:

answer

accept deposits and make loans

question

What includes anything that people generally accept as payment for good and services?

answer

money

question

Designed to create more confidence in banking institutions, the FDIC was established:

answer

during the Great Depression of the 1930's

question

What currently provides for regulating international banking and finance practices?

answer

No organization

question

What primarily provides for the financing of economic development projects throughout the world?

answer

World Bank

question

A rapid increase in the money supply may lead to a(n):

answer

increase in the rate of inflation

question

Which of the following represents a nonbank? A. Life insurance companies B. Savings and loan associations C. Credit unions D. Thrift institutions

answer

A. Life insurance companies

question

What insures holders of accounts in savings and loan associations?

answer

Savings Association Insurance Fund

question

When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit: A. provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch. B. pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay. C. requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange. D. provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.

answer

B

question

What provides the same results as a check because it withdraws funds from a checking account?

answer

debit card

question

Open market committee operations involve:

answer

the buying and selling of bonds

question

The board of governors of the Federal Reserve System determines:

answer

U.S. Monetary Policy

question

The redesign and new colors added to U.S. paper money is intended to:

answer

make the currency more difficult to counterfeit

question

The Megabux National Bank currently has deposits of $200 million. If the Fed establishes a reserve requirement of 12 percent, Megabux National must hold reserves of _______ against its deposits. A. $12 million B. $24 million C. $176 million D. $200 million

answer

B.

question

Under the Federal Reserve Act of 1913:

answer

federally chartered banks were required to join the Federal Reserve System

question

If the Fed increases interest rates in the U.S. relative to other nations,

answer

foreign investors are likely to transfer funds to U.S. investments

question

On payday, employers can designate their banks to electronically transfer funds from the business' checking account to the employees' checking account. This represents an example of a(n):

answer

direct deposit

question

Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because: A. traditional payments are subject to regulation by the Fed and electronic transactions are not. B. electronic funds are subject to a smaller reserve requirement than traditional funds. C. electronic funds transfer is more efficient and less expensive for banks than traditional check-based payments. D. the bank generates advertising revenue from its website.

answer

C.

question

The Fed Chairman is in control of:

answer

the U.S. money supply

question

Traditionally, life insurance companies, pension funds, and brokerage firms are known as:

answer

nonbanks

question

What represents an agreement by a bank to pay a foreign company a given amount if certain conditions are met?

answer

letter of credit

question

Tracing the cause of the banking crisis of 2008-2009, which of the following organizations is not in the news as having been a contributor to the crisis? A. The Federal Reserve suppressed interest rates which made it easier for prospective home owners and others to get loans. B. Congress promoted questionable loans. C. Banks dealt in MBSs (Mortgage Backed Securities) that were not as safe as assumed. D. Pension funds invested in risky investments.

answer

D.

question

What historical events motivated Congress to establish the Federal Reserve System?

answer

the banking panic and cash shortage of 1907

question

What is the process of eliminating laws and regulations that hinder competition?

answer

deregulation

question

One of the reasons you bought your mom a name-brand mixer for Mother's Day was that it came with a full warranty. This means that:

answer

the mixer will be repaired or replaced at no charge if it is defective

question

Which of the following is considered as a cause for the significant increase in bankruptcies?

answer

an increase in the ease with which some consumers can get credit

question

The body of law created by court decision rendered by judges is called ______ law.

answer

common

question

To raise money for government funding and to encourage or discourage certain taxpayer behaviors is the two main purposes of what?

answer

taxes

question

The Griggs v. Duke Power Company (1971) case established a precedent on the need to use job-related tests in employment practices. Similar court cases have been decided based on this decision. This is an example of:

answer

common law

question

_________ instruments are forms of commercial paper that are transferrable among businesses and individuals that represent a promise to pay a specified amount.

answer

Negotiable

question

_______ often help to pay for highway construction or improvements.

answer

Sin taxes

question

As it turns out, Brian and Sondra's good fortune with the restaurant has caused their competitors to lose business. In fact, Cajun Cookin' has been so successful that two other nearby restaurants are in danger of going out of business. Brian and Sondra have:

answer

done nothing against the law

question

A ______ patent refers to the situation when some inventors intentionally delay a patent application cause they expect others to develop similar products or technology.

answer

submarine

question

The Nike Swoosh and the Gold Arches of McDonald's are examples of a:

answer

trademark

question

The section of the Bankruptcy Code that allows a business to reorganize and pay only a limited proportion of its debts is Chapter:

answer

11

question

You and your boss agree to terminate your employment contract because you want to devote more time to school. This breach of contract would likely be resolved by:

answer

a discharge of obligation

question

A government policy aimed at reducing the purchase of a specific good through increased taxes has been most often applied to:

answer

beer

question

The warranty you receive in the box with your new DVD is a(n):

answer

express warranty

question

______ is the legal process by which a person, business, or government entity unable to meet financial obligations is relieved of those debts.

answer

bankruptcy

question

A patent gives inventors exclusive rights to their inventions for:

answer

20 years

question

Over ________ percent of patent applications are approved.

answer

60

question

Warren Tee was injured using a hair dryer manufactured by the Whoopee Electrical Products Company. Warren has contacted a lawyer because he feels that Whoopee is responsible for his injury based on the legal principle of:

answer

strict product liability

question

Which of the following is the most likely response to the corporate scandals of firms like Enron?

answer

New laws will be passed to protect investors and workers.

question

Mark and Barry own the Warehouse Liquor Store in town. They are careful to pay all of their taxes in full and on time. Recently the local government has decided to raise the taxes imposed on the sale of cigarettes and liquor. Barry and Mark are upset about this because:

answer

people will likely buy less cigarettes and liquor from them

question

A(n) _________ guarantees that the product you buy will conform to the customary standards of the trade/industry.

answer

implied warranty

question

A(n) __________ tort is a willful act that results in injury.

answer

intentional

question

Without the permission of the inventor, Cheatum Automobile Manufacturing copied the engine design of an innovative competitor. Cheatum is guilty of:

answer

patent infringement

question

The number of personal bankruptcies has:

answer

increased

question

Common law relies on decisions made by judges in previous cases. These earlier decisions are called:

answer

precedents

question

James advertises in the newspaper to sell his used car for $6,000. Eric test drove the car and then offered James $5,400 for the car. In this case:

answer

there is no agreement and no contract

question

The financial claims of ________ are given priority when assets are distributed among creditors in a bankruptcy case.

answer

bankruptcy lawyers

question

The social movement designed to increase and strengthen the rights and powers of buyers in business transactions is called:

answer

consumerism

question

While the government regulates business activities, businesses would prefer to set their own standards of behavior. Which of the following is the most likely reason the government has intervened?

answer

the public perceives U.S. businesses as moving too slowly in implementing acceptable standards of behavior

question

Which of the following refers to a tax designed to reduce the consumption of a specific good?

answer

a sin tax

question

The remedy for a tort is:

answer

monetary compensation

question

Cajun Cookin' sits on a large landscaped lot. Brian and Sondra have a contract with Lovely Landscapes to mow the lawn and take care of the landscape. They pay $200 per month for this service. After two weeks had gone by with no service, Brian called the company only to find out that the owner and the crew had decided to take a vacation and would not be back to do the landscaping for another two weeks. Lovely Landscapes:

answer

will likely have to pay Brian damages if Brian decides to sue them.

question

Which of the following would cause a contract to be void:

answer

duress

question

Happy Pat's Pizza Parlor is concerned about a vendor's demand that he purchase unwanted supplies in order to buy the supplies he does want. This practice is known as:

answer

a tying contract

question

__________ law establishes punishments, and regulates the investigation of people accused of committing crimes.

answer

criminal

question

Your 15-year-old brother comes home with the great news that he has decided to buy his first car and has just agreed to give $10,000 to a complete stranger. He signed the contract and just needs to pay the stranger and pick up the car. Your dad is upset and calls the stranger to tell him your brother will not be buying the car. The stranger can:

answer

do nothing

question

Which of the following can review and, when necessary, overturn decisions made at the trial court level?

answer

appellate courts

question

The Environmental Protection Agency is an example of a(n):

answer

administrative agency

question

In 1978, a 13-year-old boy was severely burned in a rear-end collision involving a Ford Pinto. The case went to court and Ford was ordered to pay $125 million in punitive damages based on the legal principle of:

answer

product liability

question

Personal financial planners often encourage their clients to write down every single penny they spend each

answer

focus attention on the spending levels for each item

question

Which of the following is a benefit unique to buying a duplex, as opposed to the purchase of a single-family home?

answer

The rent income will help make the mortgage payment

question

What is a financial plan of projected revenues and expenses called?

answer

budget

question

What is the maximum amount that can be invested in a traditional IRA?

answer

4000 in 2006, but is scheduled to increase to 5000 in 2008.

question

By using the financial planner's advice, Penny and Ira were able to find ways to cut back on their spending and began to live more modestly. They began to have a few hundred dollars left over each month after handling their normal expenses. Which of the following is the first thing they should do with their extra money?

answer

pay off their debts, starting with the ones that have the highest finance costs

question

Financial planners encourage individuals to begin contributing funds into an IRA as early as possible. The major benefit of early and regular contributions is that:

answer

the earnings will be able to grow over a longer time span, which can result in major financial gains

question

The tax-deferred investment plan that allows employees to save part of their income for retirement is called a(n):

answer

individual retirement account

question

Which of the following is true of credit cards? A. They are a cheaper way to finance your education. B. They are an efficient way to keep track of purchases. C. They are an effective way of controlling the amount of debt the consumer incurs. D. They are less convenient than carrying cash or writing a check.

answer

B

question

Trends in the number of workers contributing to the Social Security system and the number of workers drawing benefits from the system suggest that future generations will:

answer

face a later retirement age in order to qualify for full Social Security benefits

question

Your chances of becoming disabled at an early age are ________ than your chance of dying from an accident.

answer

much greater

question

John is considering starting his degree in business this semester at State University. John will likely find that:

answer

he will likely earn about $1.6 million more during his lifetime than his friends with only a high school degree

question

From a financial viewpoint, it is best to buy a:

answer

small home in an excellent neighborhood

question

A retirement plan where employers often match part of an employee's contribution is known as a:

answer

401K plan

question

The path to success in a capitalist system is to:

answer

have money to invest

question

A financial planner would encourage you to borrow money:

answer

only to buy assets that are likely to generate income or increase in value

question

Financial planning begins with:

answer

earning money

question

Which of the following is a form of whole life insurance that provides a death benefit that varies with the performance of the investments of the insurance company?

answer

variable life insurance

question

For someone with a family that includes young children, the first step in estate planning should be to:

answer

select a guardian for the children

question

The Social Security program was established in:

answer

1935

question

Which of the following is an indication that the government has recognized that problems with Social Security funding make it highly unlikely that future Social Security benefits will be sufficient to provide retirees with enough income for a comfortable retirement?

answer

The government has established incentives for workers to save their own money for retirement.

question

Shorty is worried that his health may soon deteriorate to the point where he will no longer be able to take care of his own finances. One way he could ease his mind would be to:

answer

prepare a durable power of attorney

question

Bob's credit card charges him 14% interest on his unpaid balance. His bank is offering him 5% interest on a savings account. The first thing Bob should do with any extra money he may have is to:

answer

pay off the credit card balance

question

As an employee of New Hampshire Industries, Kathleen has an opportunity to invest pre-tax income in an employer-sponsored retirement plan. Her employer will contribute 50 cents for every dollar that Kathleen contributes to this fund. This is an example of a(n):

answer

401K plan

question

Once Ira and Penny achieved a more solid financial foundation, they began to consider the purchase of a home. From a financial standpoint, a sound strategy for them to consider would be to:

answer

buy a house in one of the best areas of town, even if they can affords on a relatively small hosue

question

Approximately what percent of the population is successful in saving enough money for retirement to live comfortably?

answer

10%

question

The increase in the number of retirement plans approved by the federal government likely indicates that:

answer

Social Security can be counted on to provide an individual with ample funds for retirement

question

Slobo is an immigrant to the United States from a formerly communist country. He is searching for advice to help him succeed in a capitalist system. He would be well advised to:

answer

find a job and live frugally in order to save money to invest

question

During her sophomore year in college Melody received a letter indicating she was eligible for a credit card along with a free gift from Metro State Bank. Melody was really excited until she remembered that any cash she has usually \"burns a hole\" in her pocket. Melody would likely not be successful with a credit card because:

answer

she would use it to make impulse purchases that she could not afford

question

Which of the following deductible levels would result in the lowest premium for automobile insurance? A. $ 200 B. $ 500 C. $ 750 D. $1,000

answer

D

question

oseph and Mack are good friends who have similar jobs that pay them well. Both have established budgets that allow them to invest several hundred dollars each month. Mack has a strategy of putting most of his money in bank CDs and a savings account. Joseph has opted for a strategy of investing in the stock market. According to the evidence of the past 50 years, it is likely that over the long-run:

answer

Joseph will experience a significantly high return on his investments than Mack, but will also experience more ups and downs over the years.

question

In the future, the Social Security system is likely to:

answer

raise taxes and reduce benefits

question

Which of the following is least likely to result from the problems facing the Social Security system?

answer

reductions in Social Security taxes

question

The earnings of a traditional individual retirement account (IRA) are:

answer

taxed when the funds are withdrawn

question

Romeo and Juliet are experiencing marriage difficulties regarding money. One technique to help them control and forecast their future financial situation, as well as allow them to achieve their financial goals, would be to prepare a(n):

answer

budget

question

________ life insurance offers pure insurance protection for a given period of time.

answer

Term

question

For a young person, one of the worst places to invest money for the long-term is:

answer

a bank savings account

question

Jack is thinking about preparing a durable power of attorney. This indicates that he wants to:

answer

appoint someone to take over his finances if he should become incapacitated

question

Stan and Heidi are married and both have careers in business. If one of the two were to die, there would be a sudden drop in income. To provide protection from this risk the couple should purchase:

answer

life insurance

question

The key to generating enough capital for investment for many individuals is to:

answer

live frugally

question

A variable life insurance policy is considered riskier than a traditional whole life policy because it:

answer

invests savings more aggressively in securities that are riskier but offer higher potential returns.

question

Hilda has contributed to a Roth IRA for the last several years. She is now in her late sixties and has just retired. She plans to withdraw $3,000 this year from her Roth IRA. If she is in the 25 percent tax bracket, how much tax will she have to pay on her withdrawal?

answer

She will not owe any taxes on this withdrawal

question

Many insurance providers offer __________ policies that give a discount to families who buy several types of insurance coverage from them.

answer

umbrella

question

The biggest advantage of the new Roth IRA is that:

answer

withdrawals from the retirement plan are tax-free

question

The best way to save money is to:

answer

pay yourself first by taking out money for savings from each paycheck before deciding what to do with the remaining money.

question

James is in the 30% tax bracket. What is the after-tax cost of a $3,000 contribution to his traditional IRA account?

answer

2100

question

Which of the following is the best advice about the use of credit cards? A. Except for very small purchases, credit cards should always be used instead of cash. B. The best approach to credit cards is never even to apply for one. C. Credit cards are an important part of a personal financial system, but they should be used with care and discipline to avoid their high financial costs. D. Credit cards are most useful when making large purchases (over $500), because they allow you to spread out the payments so they fit in your budget.

answer

C

question

For workers who qualify, the earnings from income invested in a traditional IRA are:

answer

not taxed until the funds are withdrawn

question

The number of workers paying into Social Security for each retiree receiving Social Security benefits is:

answer

decreasing

question

A Roth IRA offers employees an incentive to save for their retirement by: A. deferring taxes on income contributed to the IRA. B. eliminating taxes on the withdrawals from the IRA. C. eliminating taxes on the income contributed to the IRA. D. allowing employers to match the employee's contribution to the IRA.

answer

B

question

In saving for retirement, Penny could take advantage of the unique tax shelter offered only to small-business owners in a: A. 401(k) plan. B. simple IRA plan. C. Roth plan. D. Keogh plan.

answer

D

question

A homeowner's insurance policy that includes a provision for __________ would provide the homeowner with enough cash to replace the items lost.

answer

guaranteed replaced cost

question

The people who assist families in developing a comprehensive program that covers investments, taxes, insurance, and retirement plans are called:

answer

financial planners

question

Hernando and Margarita have decided to take out an umbrella policy from an insurance company. The main reason they would probably want to do this would be to:

answer

save money by having one company provide a variety of different types of coverage.

question

Purchasing ________ insurance is a relatively low cost way of protecting yourself from lost income due to an accident or prolonged illness.

answer

disability

question

The greatest return over a period of several years is likely to be earned by investing in a: A. small home in a great location. B. savings account in a bank. C. large home in a deteriorating neighborhood. D. moderate size home in a rural setting.

answer

A

question

Which of the following is an advantage of home ownership? A. Home ownership is a good way to control the costs of utilities, maintenance, and insurance. B. Mortgage interest and real estate taxes are tax deductible. C. Money invested in a house is a highly liquid investment. D. Home ownership provides a guaranteed rate of return that is more stable than the return earned by investing in the stock market.

answer

B

question

In order to accumulate capital, young adults are likely to have to: A. accept a lifestyle that sacrifices some amenities. B. live beyond their means. C. rely on credit cards for basic purchases in order to conserve on cash. D. borrow funds from a bank.

answer

A

question

Which of the following accounting statements would assist an individual in taking inventory of personal assets and liabilities? A. income statement B. balance sheet C. budget D. statement of cash flows

answer

B

question

Young married couples that find themselves running out of money at the end of the month, might be well advised to:

answer

keep track of all their expenses

question

One strategy to lower the cost of automobile insurance is to purchase a policy with a: A. low deductible. B. high deductible. C. liability coverage rider. D. health coverage rider.

answer

B

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