AnswersCHS EconomicsBanking

Banking — Unit test Answers

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21
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Which statement best describes the effects of low and high interest rates on the economy?

L
Low interest rates encourage consumers to borrow and spend, while high interest rates encourage saving.
H
High interest rates discourage consumers from investing, while low interest rates encourage investment.
H
High interest rates encourage consumers to borrow and spend, while low interest rates encourage saving.
L
Low interest rates encourage consumers to invest, while high interest rates discourage investment.
22
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What might cause a change in the value of fiat money?

A
a change in the value of commodities
B
a change in government regulations
C
a change in materials used to make money
D
a change in individuals’ spending habits
23

The Federal Reserve transfers profits from its twelve regional banks to

A
investment and commercial banks.
B
central banks in Europe and Asia.
C
the Department of Commerce.
D
the Department of the Treasury.
24

Which scenario is an example of cost-push inflation?

A
Consumers have more money to buy cars, and the prices of cars and car parts rise as a result.
B
An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.
C
The demand for cars falls as consumers have less disposable income, and car prices fall as a result.
D
A government bailout helps car manufacturers lower their costs, and car prices fall as a result.
25

Which best describes why taxes and savings are considered leakage factors?

A
They take money out of households.
B
They take money out of the economic system.
C
They take money out of the economic sectors.
D
They take money out of the financial sector.
26

Which best describes the role that government and business play in investments?

A
They both use taxes to support a country’s growth.
B
They both invest money to earn a profit.
C
They both receive capital to use for growth.
D
They both act as angel investors for start-ups.
27

Which factors can affect a stock’s price? Check all that apply.market performancethe company’s financial healththe quantity products producedlocation of the companythe economy

A
market performance
B
the company’s financial health
C
the quantity products produced
D
location of the company
E
the economy
28

Read the graph that displays interest and total payments on a loan.Banks make the most money and take the most risk with an interest rate of

Question illustration
A
5 percent.
B
10 percent.
C
15 percent
D
18 percent.
29

What is a potential disadvantage of using debit cards when compared to barter and traditional currency?

A
collaborative
B
wide acceptance
C
ease of overspending
D
more privacy and flexibility
30

Which best describes why taxes and savings are considered leakage factors?

A
They take money out of households.
B
They take money out of the economic system.
C
They take money out of the economic sectors.
D
They take money out of the financial sector.
31

The Federal Reserve transfers profits from its twelve regional banks to

A
investment and commercial banks.
B
central banks in Europe and Asia.
C
the Department of Commerce.
D
the Department of the Treasury.
32

Which is the correct order of entities that benefit when banks make a profit?

A
employees, shareholders, and the economy
B
shareholders, shoppers, and the economy
C
employees, companies, and the economy
D
shareholders, companies, and the economy
33

Which best describes the purpose served by economic models within an economic system?

A
Models identify patterns.
B
Models determine the business cycle.
C
Models control change.
D
Models define global demand.
34

During a recession, what is one way governments try to encourage growth?

A
by increasing unemployment benefits
B
by stopping government spending
C
by requiring firms to maintain production
D
by eliminating all tax breaks
35

This is a graph showing price and total output in the short and long run. According to this graph, how does supply behave in the long run?

Question illustration
A
Output remains constant.
B
Output increases.
C
Output cannot be predicted.
D
Output decreases.
36

Exchange rates can indicate economic health by

A
showing exactly how much of each nation’s currency is liquid.
B
revealing how much of each nation’s income goes to savings.
C
showing the relative strength of different nations’ currencies.
D
examining spending patterns across nations and continents.
37

The main role of banks in the nation’s economy is to

A
store, lend, and invest money.
B
store, lend, and borrow money.
C
store, lend, and distribute money.
D
store, lend, and approve money.
38

Hyperinflation can occur when

A
consumers begin purchasing more goods.
B
producers need more money to make and distribute goods.
C
companies raise prices to pass on costs to consumers.
D
the government prints a ton of money in order to pay off its debt.
39

Read the graph that displays mortgage interest rates between 1978 and 1983.In what year did consumers get the best deal on a mortgage?

Question illustration
A
1978
B
1980
C
1982
D
1983
40

Which of the following is a characteristic of prosperity in the peak phase of the business cycle?

A
stagnant prices
B
high levels of production
C
ambivalence about the economy
D
reduced incomes

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