Question

10. Commercial banks, mutual fund companies, and securities firms are all part of the _____ services industry.

Multiple Choice

• government

• economic

• financial

• political

11. To reduce the Federal funds rate, the Fed can:

Multiple Choice

• buy government bonds from the public.

• increase the discount rate.

• increase the prime interest rate.

• sell government bonds to commercial banks.

12. Money is destroyed when:

Multiple Choice

• loans are made.

• checks written on one bank are deposited in another bank.

• loans are repaid.

• the net worth of the banking system declines.

13. One of the principal defects of using a commodity as money is that its worth as a:

Multiple Choice

• medium of exchange may exceed its worth as a standard of account, causing it to cease being useful as money.

• unit of account may exceed its worth as a store of value, causing it to cease being useful as money.

• medium of exchange may exceed its worth as a store of value, causing it to cease being useful as money.

• commodity may exceed its worth as money, causing it to cease functioning as a medium of exchange.

14. If the interest rate increases, there will be a(n):

Multiple Choice

• decrease in the amount of money held as assets.

• decrease in the transactions demand for money.

• increase in the transactions demand for money.

• increase in the amount of money held as assets.

15. What primary function is money serving when you keep it in a bank account until you need it to purchase a product?

Multiple Choice

• A store of value.

• A unit of account.

• A medium of exchange.

• A double coincidence of wants.

16. A consumer holds money to meet spending needs. This would be an example of the:

Multiple Choice

• use of money as a measure of value.

• use of money as legal tender.

• transactions demand for money.

• asset demand for money.

Answer 1

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Question:

Answer:

10). Answer:

Commercial banks, mutual fund companies, and securities firms are all part of the financial  services industry.

Financial Services Industry: The financial services industry is a section or part of the economy made up of firms/companies and institutions that provide financial services to commercial and retail customers like banks, investment companies, insurance companies, and real estate firms.

11). Answer:

To reduce the Federal funds rate, the Fed can:buy government bonds from the public.

Changing Federal funds rate is part of the monetary policy by which the Federal Bank affect the Federal funds fund rate through the changing in money supply. When the Fed want to reduce the Federal funds rate then Fed buy government bonds from the public through open market operation and it increase the money supply and reduced the Federal funds rate and vice-versa.

12). Answer:

Money is destroyed when: loans are repaid.

When banks make loans, new money (in the form of numbers in somebody’s bank account) is created and when these loans are repaid money is destroyed.

13). Answer:

One of the principal defects of using a commodity as money is that its worth as a: medium of exchange may exceed its worth as a store of value, causing it to cease being useful as money.

Using a commodity that changes in value is a big challenge. Prices would change because the commodity's value changed.

14). Answer:

If the interest rate increases, there will be a(n): decrease in the transactions demand for money.

Transaction demand for money is a measure of how much of a certain amount of currency people need to buy the goods and services they use in daily life. We all now the transactions demand for money and interest have opposite relation. When, interest rate increase then the transactions demand for money decrease and vice-versa.

15). Answer:

What primary function is money serving when you keep it in a bank account until you need it to purchase a product? - A store of value.

A store of value is an asset that maintains its value without depreciating and a bank account do the same.

16). Answer:

A consumer holds money to meet spending needs. This would be an example of the: transactions demand for money.

Transaction demand for money is a measure of how much of a certain currency people need in order to buy the goods and services they use. Consumers hold it to fulfill their spending need. It is in very liquid in nature like, coins note, traveler checks etc.

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