Midterms_BanFin_Quiz1

What is the primary function of money?

• To improve production techniques

• To increase consumption

• To serve as a medium of exchange

• To create wealth

Which of the following is NOT a function of money?

• Medium of production

• Unit of account

• Store of value

• Medium of exchange

What is the central bank's role in the economy?

• To collect taxes

• To create jobs

• To control the nation's money supply and interest rates

• To provide loans to small businesses

Which entity is responsible for regulating banks in the U.S.?

• Securities and Exchange Commission

• Treasury Department

• Federal Reserve

• Department of Commerce

What happens to the money supply if the central bank buys government securities?

• The money supply remains unchanged

• The interest rates increase

• The money supply expands

• The money supply contracts

The main purpose of a commercial bank is to:

• Set interest rates

• Issue currency

• Facilitate financial transactions and provide loans

• Regulate the money supply

When banks make loans, they:

• Only move existing money

• Do not affect the money supply

• Destroy money

• Create money

What is the purpose of deposit insurance?

• To set interest rates

• To prevent banks from lending

• To guarantee depositors their funds in case of a bank failure

• To protect banks from failure

Monetary policy involves:

• Import and export regulations

• Controlling the money supply and interest rates

• Taxation

• Government spending

What is the primary goal of monetary policy?

• To increase exports

• To raise government revenue

• To stabilize the currency and control inflation

• To reduce taxes