Chapter 9 - Lecture Flashcards
What is the defining feature of fiat money?
A) It is backed by gold or other commodities.
B) Its value is declared by the issuing government without physical backing.
C) It can be exchanged for tokens of equivalent value.
D) It is only used for international trade.
B) Its value is declared by the issuing government without physical backing.
Why was the influx of silver from Potosi significant for the global economy?
A) It introduced barter systems across Europe.
B) It shifted Europe from barter-based to cash-based economies.
C) It led to the end of colonialism in South America.
D) It exclusively benefited the Bolivian population.
B) It shifted Europe from barter-based to cash-based economies.
What is a key characteristic of commodity money?
A) Its value depends on the issuing government’s policies.
B) It has intrinsic value and can be traded as a physical good.
C) It is only used in modern electronic transactions.
D) It has no physical representation, existing solely as a concept.
B) It has intrinsic value and can be traded as a physical good.
How did the Spanish acquisition of silver from Potosi impact global trade?
A) It strengthened Spain’s colonial and military influence.
B) It limited Europe’s trading power in Asia.
C) It disrupted local economies in Asia.
D) It replaced the barter system in Africa with digital currency.
A) It strengthened Spain’s colonial and military influence.
What is a modern economic significance of Potosi?
A) It remains one of the world’s richest sources of silver.
B) It is a hub for international banking systems.
C) It has become a major producer of lithium for batteries.
D) It is a global leader in digital currency production.
C) It has become a major producer of lithium for batteries.
What was the original purpose of the Bank of England in 1694?
A) To regulate all British banks.
B) To finance a navy by raising money for the government.
C) To manage the public debt from the American Revolution.
D) To create a standardized currency across British colonies
B) To finance a navy by raising money for the government.
What event led to the creation of the United States Federal Reserve in 1913?
A) The Great Depression.
B) The Panic of 1907 and JP Morgan’s intervention.
C) The failure of the gold standard in America.
D) The rise of electronic banking systems.
B) The Panic of 1907 and JP Morgan’s intervention.
Why was the Bank of Canada established in 1935?
A) To copy the U.S. Federal Reserve Act of 1913.
B) To address economic challenges of the Great Depression.
C) To regulate global banking practices.
D) To maintain the gold standard in Canada.
B) To address economic challenges of the Great Depression.
What change in Canadian banking occurred after the 1967 Bank Act revision?
A) Banks were prohibited from issuing mortgages.
B) The interest rate ceiling on personal loans was removed.
C) Canadian banks were privatized for the first time.
D) Gold reserves were introduced as a standard for all banks.
B) The interest rate ceiling on personal loans was removed.
What is a key requirement for modern digital payment systems like Bitcoin or Apple Pay?
A) Government backing of their value.
B) Public trust in their reliability and security.
C) Integration with traditional barter systems.
D) Physical assets to back their transactions.
B) Public trust in their reliability and security.
What is a primary function of central banks in capitalist economies?
A) Regulate international trade agreements.
B) Provide loans directly to businesses.
C) Control the monetary supply and act as lenders of last resort.
D) Operate private banking systems for large corporations.
C) Control the monetary supply and act as lenders of last resort.
Why are banks crucial for capitalist economies?
A) They operate as tax collectors for governments.
B) They create pools of capital for loans and investments.
C) They exclusively manage gold reserves.
D) They eliminate the need for paper currency.
B) They create pools of capital for loans and investments.
Why did Canada abandon the gold standard in 1931?
A) To align its economy with the United States.
B) To reinflate its economy during the Great Depression.
C) To adopt token money systems.
D) To establish the Bank of Canada.
B) To reinflate its economy during the Great Depression.
What event led to stronger banking regulations in Canada after 1923?
A) The collapse of the Home Bank.
B) The Great Depression.
C) The establishment of the Royal Commission.
D) The adoption of fiat money.
A) The collapse of the Home Bank.
