Multiple Choice Answers

1) The total of the balances in the creditor’s accounts should agree with the balance of the __________ account in the general ledger.
A. Purchases
B. Accounts Receivable
C. Accounts Payable
D. Sales

2) Freight charges on merchandise purchases should be debited to the:
A. Purchases account.
B. Accounts Payable account.
C. Freight In account.
D. creditor’s account in the subsidiary ledger.

3) The Purchases account is a __________ account.
A. permanent
B. temporary
C. subsidiary
D. liability

4) Purchases of merchandise on credit should be recorded in the __________ journal.
A. purchases
B. general
C. cash payments
D. sales

5) Credit terms of 1/10, n/30 mean that:
A. payment in full is due 10 days after date of the invoice.
B. payment in full is due 30 days after date of the invoice.
C. if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 20 days.
D. if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 30 days.

6) Which of the following credit terms is offering the customer a 3% cash discount if payment is made within 5 days of the invoice date?
A. 1/5, n/30
B. 5/3, n/EOM
C. 3/5, n/45
D. 5/1, n/3
7) A creditor’s account in the accounts payable ledger has a $1,600 beginning balance. After a transaction for $700 is posted from the purchases journal, the balance of the creditor’s account is:
A. $2,300 debit.

B. $900 credit.
C. $2,300 credit.
D. $900 debit.

8) To record a return of merchandise purchased on credit, the accountant would debit __________ and credit __________.
A. Purchases Returns and Allowances; Accounts Receivable
B. Purchases Returns and Allowances; Purchases
C. Accounts Payable; Purchases Returns and Allowances
D. Purchases; Purchases Returns and Allowances
9) The entry to record a purchase of merchandise on credit includes a:
A. debit to Purchases and a credit to Accounts Receivable.
B. credit to Purchases and a credit to Accounts Payable.
C. debit to Accounts Payable and a credit to Purchases.
D. debit to Purchases and a credit to Accounts Payable.

10) The amount of the purchases for a period is presented in the:
A. Liabilities section of the balance sheet.
B. Revenue section of the income statement.
C. Cost of Goods Sold section of the income statement.
D. Expenses section of the income statement.

11) A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was:
A. $14,800.
B. $17,600.
C. $16,200.
D. $15,400.

12) In a firm that uses special journals, the return of damaged merchandise to a supplier and receipt of a credit memorandum is recorded in the __________ journal.
A. cash payments
B. cash receipts
C. purchases
D. general

13) When the sales department needs goods, it sends the purchasing department a form called a:
A. purchase invoice.

B. purchase order.
C. purchase requisition.
D. sales invoice.

14) Credit purchases of supplies that are to be used in the business are entered in the __________ journal.
A. purchases
B. general
C. cash payments
D. cash receipts

15) After a supplier of merchandise is selected, the purchasing department issues a form called a:
A. purchase invoice.
B. purchase order.
C. sale invoice.
D. purchase requisition.

16) Which of the following statements is correct?
A. Freight In is subtracted from Purchases to arrive at delivered cost of purchases.
B. Another name that may be used for the Freight In account is “Transportation In.”
C. Freight charges that are listed on the invoice received from a supplier are not part of the total credit to Accounts Payable to record the credit purchase.
D. None of these statements is correct

17) Which of the following accounts is a contra cost of goods sold account?
A. Accounts Payable
B. Cash
C. Purchases
D. Purchases returns and allowances

18) The account of a creditor in the accounts payable ledger had a balance at the beginning of the month of $3,000. During the month total postings to the account from the purchases journal were $500. Also, there was a posting of $300 to the account from the general journal for a purchase return. The balance of the creditor account at the end of the month would be:
A. $2,200.
B. $2,800.
C. $3,000.
D. $3,200.

19) Which of the following represents a bill received for goods purchased?

A. Purchase invoice
B. Purchase order
C. Purchase requisition
D. Purchases journal

20) Postings to the accounts payable ledger from the purchases journal should be made:
A. daily.
B. weekly.
C. monthly.
D. at the end of the fiscal period.

Multiple Choice Answers

For central bankers to alter the real interest rate by changing the nominal interest rate, which of the following must be true?

The rate of inflation has to remain constant
Inflation expectations do not change
The expected rate of inflation has to change
The change in the expected rate of inflation must equal the change in the nominal interest rate

In the U.S., most of the recessions are the result of:

Ill-timed fiscal policy
Decreasing net exports
Decreases in investment
Large decreases in consumption

If an economy is initially at a state of long-run equilibrium, the short-run effect(s) from a decrease in aggregate demand will include:

An expansionary gap
A higher rate of inflation
A higher level of potential output
A recessionary gap

In practice, it is difficult to keep inflation and output from fluctuating when aggregate expenditures change because:

It takes time for policymakers to recognize that shifts have occurred
Changes in interest rates do not have an immediate impact on the economy
Changes in consumer or business confidence can be very difficult to recognize as they are occurring
All of the answers given are correct

During the Great Moderation experienced in the United States during the 1990s the volatility of inflation and growth:

Moved in opposite directions
Both dropped significantly
Both increased but only slightly.
Disappeared.

10. Given a firm’s liabilities, an increase in interest rates reduces the firm’s net worth because:

Profits will be lower due to higher interest costs
Asset values will increase
The principal amount of the loans will increase
All of the answers given are correct

During the 1990s, the Japanese recession did not respond to the continual interest rate reductions implemented by monetary policymakers. Which of the following contributing to this lack of response?

Many banks that continued to make loans were actually insolvent
The Japanese stock market collapsed
Property values fell dramatically
All of the answers given are correct

Asset-backed securities include:

Mortgage-backed securities held by government-sponsored enterprises
Car loans and student loans
Credit card debt
All of the answers given are correct

Which best describes money as a means of payment?

Money provides an immediate double coincidence of wants
Money makes sure a double coincidence of wants never occurs
Money requires at least two transactions to obtain the double coincidence of wants
To obtain a double coincidence of wants without money is impossible

Suppose Mary receives an $8,000 loan from First National Bank. Mary repays $8,480 to First National Bank at the end of one year. Assuming the simple calculation of interest, the interest rate on Mary’s loan was:

8.00%
5.66%
$480
6.00%

Interest-rate risk would not matter to which of the following bondholders?

A holder of a U.S. government bond
A holder of a U.S. government bond indexed for inflation
A holder of a U.S. government bond that plans on holding it until it matures
A holder of a U.S. government bond who plans on selling it in one year

Financial instruments are used to channel funds from:

Savers to borrowers in financial markets and via financial institutions
Savers to borrowers in financial markets but not through financial institutions
Borrowers to savers in financial markets but not through financial institutions
Borrowers to savers through financial institutions, but not in financial markets

Which of the following statements is most correct?

All banks are financial intermediaries, but not all financial intermediaries are banks
Financial intermediaries must be public corporations
All financial intermediaries are insurance companies
Financial intermediaries are government agencies

As inflation increases, for any fixed nominal interest rate, the real interest rate:

Also increases
Remains the same, that’s why it is real
Decreases
Decreases by less than the increase in inflation

If a lender wants to earn a real interest rate of 3% and expects inflation to be 3%, he/she should charge a nominal interest rate that:

Is at least 7%
Is anything above 0%
Equals the real rate desired plus expected inflation
Equals the real rate desired less expected inflation

Multiple Choice Answers

1. As the ocean floor spreads, other parts plunge into the mantle. This process is called
A. subduction.
B. plate tectonics.
C. continental drift.
D. paradigm shift.

2. Which one of the following is an example of a nonrenewable resource?
A. Coal
B. Wood
C. Topsoil
D. Water

3. The speed of P-waves and S-waves can help seismologists to determine the
A. size of an earthquake.
B. energy of an earthquake.
C. distance to the epicenter of an earthquake.
D. location of an earthquake.

4. Which one of the following types of volcanoes would be the most explosive?
A. Volcanoes that contain small amounts of water
B. Volcanoes that have thin magma
C. Volcanoes that contain small amounts of carbon dioxide
D. Volcanoes that have large amounts of silica

5. Mountains that formed when two continents collided are the
A. Himalayas.
B. Alps.
C. Appalachian Mountains.
D. Teton Mountains.

6. The place on Earth’s surface directly above the point where movement first occurs in an earthquake is called the
A. focus.
B. stress point.
C. deformation.
D. epicenter.

7. The area where two neighboring tectonic plates move away from one another is called an area’s _______ boundary.
A. divergent
B. convergent
C. transform
D. paradigm

8. Where do most volcanoes form?
A. Along plate boundaries
B. In the center of major continents
C. Anywhere in the ocean floor
D. In the North American continent

9. Fossil fuels are made from
A. minerals.
B. plants and animals.
C. inorganic matter.
D. water and gases.

10. Because of the high temperatures and extreme pressure, the rocks in the asthenosphere are
A. soft and flowing.
B. dense and solid.
C. brittle and thick.
D. molten and liquidy.

11. The Richter scale measures
A. magnitude.
B. intensity.
C. distance.
D. location.

12. Suppose the highest point in a landscape is 2,000 meters above sea level. The lowest point in the same landscape is 500 meters. The relief of this landscape is _______ meters.
A. 400
B. 1,500
C. 2,500
D. 10,000

13. A mineral commonly used for melting ice on slippery winter surfaces is
A. feldspar.
B. hematite.
C. halite.
D. garnet.

14. What type of volcano has alternate layers of ash and lava?
A. Shield
B. Cinder cone
C. Composite
D. Caldera

15. Which one of the following pieces of evidence did Wegener use to support his theory of continental drift?
A. The mid-ocean ridge is sinking into the ocean trenches.
B. A similar fossil was found in Africa, South America, Australia, India, and Antarctica.
C. The rock in the ocean floor is magnetized in the same direction.
D. The age of the rocks in the sea floor is all the same.

16. Green plants produce oxygen and food through a process called
A. burning.
B. decay.
C. respiration.
D. photosynthesis.

17. The landform with the highest elevation is the
A. valley.
B. plateau.
C. plain.
D. mountain.

18. The largest layer of Earth is the
A. crust.
B. mantle.
C. outer core.
D. inner core.

19. How have scientists determined that the outer core of Earth is liquid?
A. P-waves speed up in the outer core.
B. P-waves don’t travel through the outer core.
C. S-waves come to a complete stop in the outer core.
D. S-waves slow down and then speed up in the outer core.

20. The most common way for mountains to form is when
A. two plates come together.
B. folding occurs during plate collisions.
C. two continents collide.
D. volcanoes erupt.

Multiple Choice Answers

Question 1
Which of the following is true concerning the consumer price index (CPI)?
Question 1 options:
It reports price changes in a representative “basket” of household purchases.
It includes both goods and services, but the “core rate” excludes food and energy prices.
An increase in the CPI indicates a rise in price inflation in the U.S. economy.
All of the above.

Question 2
When money is held primarily to preserve wealth, it is performing its function as a
Question 2 options:
standard of value.
measure of value.
store of value.
structure of value.

Question 3
According to the expectations theory, which yield curve configuration reflects investor expectations that there will be a fall in future interest rates relative to current interest rates?
Question 3 options:
Normal
Inverted
Humped
Flat

Question 4
Historically, an inverted yield curve for U.S. Treasury securities has often signaled
Question 4 options:
an economic expansion.
an economic recession.
a period of increased productivity.
a period of economic stability.
Question 5
If investor expectations are the dominant factor in causing the yield curve to become inverted,
Question 5 options:
interest rates are expected to decline over time.
interest rates are expected to increase over time.
interest rates are expected to remain the same over time.
interest rates are not expected to affect the shape of the yield curve.

Question 10
The total amount of loanable funds available to U.S. borrowers is influenced by changes in:
I. The rate of savings
II. The availability of bank credit
III. The velocity of circulation
Question 10 options:
I and II only
I and III only
II and III only
I, II, and III
Question 11
The Federal Reserve System includes:
I. Regional (district) banks
II. Branch banks of various regional banks
III. Check processing centers throughout the U.S.
Question 11 options:
I and II only
I and III only
II and III only
I, II, and III

Question 12
The goals of the Federal Reserve include:
I. Promoting a healthy level of U.S. economic employment and productivity
II. Managing the money supply so as to preclude high rates of price inflation
III. Insuring an adequate amount of government debt is issued to cover federal deficit spending
Question 12 options:
I and II only
I and III only
II and III only
I, II, and III

Question 13
Most members of the Federal Reserve Board of Governors
Question 13 options:
serve their full term of office.
leave before serving their full term of office.
are appointed for a second full term of office.
serve a lifetime appointment to office.
Question 14
Which of the following are voting members of the Federal Open Market Committee?
I. The chairman and vice-chairman of the Federal Reserve Board of Governors
II. The president of the New York Federal Reserve District Bank
III. The remaining eleven presidents of the district banks
Question 14 options:
I and II only
I and III only
II and III only
I, II, and III
Question 15
Why is the president of the New York Federal Reserve District Bank accorded permanent membership on the FOMC?
Question 15 options:
The position is purely symbolic, since the NY District Bank is located on Wall Street.
The NY District Bank is the FOMC’s agent in monetary policy transactions.
The president of the NY District Bank always sits on the U.S. President’s cabinet.
The SEC requires the NY District Bank president to attend all FOMC meetings.
Question 16
Members of the seven-member Board of Governors of the Federal Reserve System are appointed for _________, while the Chairman of the Board of Governors is appointed for __________.
Question 16 options:
a fourteen year term of office; a four year term of office with reappointment possible
an indefinite term of office; a one-time four year term of office
a fourteen year term of office; a one-time four year term of office
an indefinite term of office; a four year term of office with reappointment possible

Question 17
Which of the following financial institutions is required to conform to the reserve requirements mandated by the Federal Reserve System?
I. National banks
II. State banks
III. Credit unions
Question 17 options:
I and II only
I and III only
II and III only
I, II, and III
Question 18
Which of the following is true concerning meetings of the Federal Open Market Committee?
Question 18 options:
Meetings occur only as needed, but usually on a quarterly basis.Members are permitted to voice their opinions, but not to vote on issues.
Press releases of matters discussed in FOMC meetings are never made publicly available.
None of the above