Functions and Roles of Money/Banking Quiz

What is the primary way that banks earn income?

• By charging fees for account services

• By selling financial products

• From interest on loans

• From investing in the stock market

Which of the following describes the "spread" in banking?

• The difference between a bank's assets and liabilities

• The profit earned by a bank after deducting all costs

• The difference between the interest paid on deposits and the interest received on loans

• The percentage of money a bank keeps in reserves

Which type of bank focuses on consumer and small business services?

• Commercial banks

• Central banks

• Investment banks

• Retail banks

What are a bank’s liabilities?

• Loans that the bank has made

• Cash obligations, such as mortgage payments owed

• Assets that can be liquidated

• Investments in other businesses

Which of the following is NOT a type of depository intermediary?

• Credit unions

• Insurance companies

What is a key role of banks in the economy?

• Regulating the stock market

• Transferring money to provide economic growth and stabilizing monetary supply

• Controlling inflation directly

• Managing the country's reserves

Which of the following is a principle of banking?

• A bank’s liabilities are more liquid than its assets

• A bank’s liabilities are always smaller than its assets

• Banks must hold all deposits as liquid assets

• A bank’s reserves exceed its liabilities

What type of institution earns money by selling specific services or policies, without taking or holding deposits?

• Commercial banks

• Credit unions

• Nondepository intermediaries

• Savings and loan associations

Which of the following is not a function of money?

• Medium of exchange
  

• Unit of account
  

• Measure of liquidity
  

• Store of value

Why is money considered a store of value?

• It can be used in place of goods for direct barter.

• It allows for deferred payments

• It retains purchasing power over time.

• It determines the price of goods and services