CH 3.3 : Money and Banking

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What is the primary function of managing a country's foreign reserves?

To regulate the economy's monetary policy (correct)

To promote confidence in the banking system

To control the amount of money banks can lend

To influence lending rates across the banking sector

What is the consequence of bank failures on the broader economy?

Increased job opportunities for employees

Greater confidence in the banking system

Potential systemic risk affecting the economy (correct)

Higher deposit rates for investors

What is the primary characteristic of commodity money?

Government-issued currency

Digital or paper representations of money

Funds in checkable accounts

Physical goods used as money (correct)

What is the primary role of a stable banking system?

To promote confidence and support economic growth Signup and view all the answers

What is the effect of reserve requirements on the banking sector?

Controlling the amount of money banks can lend Signup and view all the answers

Which of the following is a function of money as a medium of exchange?

Facilitating the buying and selling of goods and services Signup and view all the answers

Why is understanding the dynamics of money and banking essential?

To understand the role of banks in economic growth Signup and view all the answers

What is the main purpose of micro-lending?

To provide small loans to individuals unable to access traditional bank financing Signup and view all the answers

What is the role of the South African Reserve Bank (SARB) in the financial system?

To implement monetary policy and maintain financial stability Signup and view all the answers

What is the consequence of bank failures on depositors?

Losses for depositors Signup and view all the answers

What is the primary characteristic of fiat money?

It is a government-issued currency not backed by a physical commodity Signup and view all the answers

What is the primary tool used to influence lending rates across the banking sector?

Repo rate adjustments Signup and view all the answers

What is the main function of demand deposits?

To make funds available on-demand Signup and view all the answers

What is the importance of stability in the banking system?

Supporting economic growth and promoting confidence Signup and view all the answers

What is the role of the banking system in the economy?

To support economic growth and promote confidence Signup and view all the answers

What is the primary purpose of credit creation?

To extend loans exceeding the bank's cash reserves Signup and view all the answers

Why is careful oversight and robust monetary policies necessary in South Africa?

Due to the country's advanced banking system Signup and view all the answers

What is the main characteristic of bank money?

It is a digital or paper representation of money Signup and view all the answers

What is the primary function of the store of value function of money?

To maintain its value over time Signup and view all the answers

What is the main limitation of credit creation?

The bank's reserve requirements and the demand for loans Signup and view all the answers

What is the primary characteristic of money in terms of its value?

It must hold value and be scarce enough to be valuable. Signup and view all the answers

Which of the following is NOT a technical function of money?

Employment Creation Signup and view all the answers

What is the primary purpose of time deposits?

To facilitate long-term savings Signup and view all the answers

What is the primary consequence of credit creation?

An increase in the money supply Signup and view all the answers

Which of the following is a characteristic of fiat money?

It is not backed by a physical commodity Signup and view all the answers

What is the primary role of the South African Reserve Bank (SARB) in monetary policy?

To control inflation Signup and view all the answers

What is the primary benefit of micro-lending?

It provides small loans to individuals unable to access traditional bank financing Signup and view all the answers

Which of the following is a characteristic of bank money?

It is a digital or paper representation of money Signup and view all the answers

What is the primary purpose of the unit of account function of money?

To provide a common measure of the value of goods and services Signup and view all the answers

What is the primary limitation of credit creation by banks?

The bank's reserve requirements Signup and view all the answers

What is the purpose of adjusting the repo rate in monetary policy?

To influence lending rates across the banking sector Signup and view all the answers

What is a potential consequence of a bank failure?

Systemic risk affecting the broader economy Signup and view all the answers

Why is a stable banking system crucial for the economy?

It supports economic growth and manages monetary policy Signup and view all the answers

What is the primary role of banks in the economy?

To support economic growth and facilitate transactions Signup and view all the answers

What is the significance of the banking system in South Africa?

It is a crucial part of the global financial system Signup and view all the answers

What is the consequence of a lack of oversight in the banking system?

Systemic risk and potential bank failures Signup and view all the answers

What is the primary function of reserve requirements?

To control the amount of money banks can lend Signup and view all the answers

What is the significance of understanding the dynamics of money and banking?

It is essential for grasping how financial systems operate Signup and view all the answers

What is the primary consequence of a loss of public trust in the banking system?

Systemic risk and potential bank failures Signup and view all the answers

What is the primary role of banks in managing monetary policy?

To influence lending rates and money supply Signup and view all the answers

Which of the following characteristics of money is most closely related to its ability to maintain its value over time?

Stability Signup and view all the answers

What is the primary mechanism by which banks create new money in an economy?

Credit creation Signup and view all the answers

Which of the following types of money is most susceptible to inflation?

Fiat money Signup and view all the answers

What is the primary role of the South African Reserve Bank (SARB) in the financial system?

Implementing monetary policy Signup and view all the answers

Which of the following is a limitation of credit creation by banks?

All of the above Signup and view all the answers

What is the primary purpose of the unit of account function of money?

Providing a common measure of the value of goods and services Signup and view all the answers

Which of the following is a characteristic of bank money?

Digital representation Signup and view all the answers

What is the primary role of micro-lending in the economy?

Providing small loans to individuals Signup and view all the answers

Which of the following is a technical function of money?

All of the above Signup and view all the answers

What is the primary benefit of a stable banking system in the economy?

Increased financial stability Signup and view all the answers

What is the primary concern of managing the country's foreign reserves?

Ensuring stability in the banking system Signup and view all the answers

Which of the following is a consequence of bank failures that can have a broader impact on the economy?

Systemic risk affecting the broader economy Signup and view all the answers

What is the primary role of reserve requirements in monetary policy?

Controlling the amount of money banks can lend Signup and view all the answers

Why is the banking system crucial for the economy?

Because it plays a central role in the financial system Signup and view all the answers

What is the primary benefit of a stable banking system?

Promoting confidence and supporting economic growth Signup and view all the answers

What is the primary consequence of a lack of oversight in the banking system?

Bank failures and systemic risk Signup and view all the answers

Why is understanding the dynamics of money and banking essential?

To grasp how financial systems operate and the role of banks in economic growth Signup and view all the answers

What is the primary role of repo rate adjustments in monetary policy?

Influencing lending rates across the banking sector Signup and view all the answers

What is the significance of the banking system in South Africa?

It plays a central role in the financial system and the economy Signup and view all the answers

Why is careful oversight necessary in the banking system?

To prevent bank failures and maintain stability in the banking system Signup and view all the answers

CH 3.3 : Money and Banking

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Questions and Answers

What is the primary function of managing a country's foreign reserves?

What is the consequence of bank failures on the broader economy?

What is the primary characteristic of commodity money?

What is the primary role of a stable banking system?

What is the effect of reserve requirements on the banking sector?

Which of the following is a function of money as a medium of exchange?

Why is understanding the dynamics of money and banking essential?

What is the main purpose of micro-lending?

What is the role of the South African Reserve Bank (SARB) in the financial system?

What is the consequence of bank failures on depositors?

What is the primary characteristic of fiat money?

What is the primary tool used to influence lending rates across the banking sector?

What is the main function of demand deposits?

What is the importance of stability in the banking system?

What is the role of the banking system in the economy?

What is the primary purpose of credit creation?

Why is careful oversight and robust monetary policies necessary in South Africa?

What is the main characteristic of bank money?

What is the primary function of the store of value function of money?

What is the main limitation of credit creation?

What is the primary characteristic of money in terms of its value?

Which of the following is NOT a technical function of money?

What is the primary purpose of time deposits?

What is the primary consequence of credit creation?

Which of the following is a characteristic of fiat money?

What is the primary role of the South African Reserve Bank (SARB) in monetary policy?

What is the primary benefit of micro-lending?

Which of the following is a characteristic of bank money?

What is the primary purpose of the unit of account function of money?

What is the primary limitation of credit creation by banks?

What is the purpose of adjusting the repo rate in monetary policy?

What is a potential consequence of a bank failure?

Why is a stable banking system crucial for the economy?

What is the primary role of banks in the economy?

What is the significance of the banking system in South Africa?

What is the consequence of a lack of oversight in the banking system?

What is the primary function of reserve requirements?

What is the significance of understanding the dynamics of money and banking?

What is the primary consequence of a loss of public trust in the banking system?

What is the primary role of banks in managing monetary policy?

Which of the following characteristics of money is most closely related to its ability to maintain its value over time?

What is the primary mechanism by which banks create new money in an economy?

Which of the following types of money is most susceptible to inflation?

What is the primary role of the South African Reserve Bank (SARB) in the financial system?

Which of the following is a limitation of credit creation by banks?

What is the primary purpose of the unit of account function of money?

Which of the following is a characteristic of bank money?

What is the primary role of micro-lending in the economy?

Which of the following is a technical function of money?

What is the primary benefit of a stable banking system in the economy?

What is the primary concern of managing the country's foreign reserves?

Which of the following is a consequence of bank failures that can have a broader impact on the economy?

What is the primary role of reserve requirements in monetary policy?

Why is the banking system crucial for the economy?

What is the primary benefit of a stable banking system?

What is the primary consequence of a lack of oversight in the banking system?

Why is understanding the dynamics of money and banking essential?

What is the primary role of repo rate adjustments in monetary policy?

What is the significance of the banking system in South Africa?

Why is careful oversight necessary in the banking system?

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