Question 1

A series of bank failures and a cash shortage in 1907 led to the establishment of the Federal Reserve System in 1913.

Accepted Answer

A) True 
 B)False

Question 2

A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.

Accepted Answer

A) True 
 B)False

Question 3

An electronic funds transfer system EFT)is an electronic transaction system used for paying bills,making direct deposits of paychecks,and paying for a purchase.

Accepted Answer

A) True 
 B)False

Question 4

Although there are many features about online banking that customers do not care for,they are seldom concerned with the security due to continued assurances by the banking industry.

Accepted Answer

A) True 
 B)False

Question 5

The Federal Reserve represents a "bankers' bank" because:

Accepted Answer

A)  it was created as a central clearinghouse for the transactions of the largest banks.
B)  commercial banks compete with the FED for business customers.
C)  it lobbies Congress in support of banking reform legislation.
D)  it holds the deposits of commercial banks and makes loans to banks that need additional funds.E) B) and C)
F) B) and D)

Question 6

The Federal Reserve System consists of ________ Federal Reserve banks.

Accepted Answer

A)  5
B)  9
C)  12
D)  14E) None of the above
F) A) and B)

Question 7

The __________ primarily provides for the financing of economic development projects throughout the world.

Accepted Answer

A)  International Monetary Fund
B)  International Reserve Bank
C)  World Bank
D)  World Development AuthorityE) C) and D)
F) None of the above

Question 8

Most countries restrict the flow of money in and out of their borders.

Accepted Answer

A) True 
 B)False

Question 9

After Bill and Jillian deposited nearly $30,000 in a savings account at Farmers National Bank,the bank failed and filed for bankruptcy.Because the Farmers National Bank was an FDIC member bank,Bill and Jillian's savings:

Accepted Answer

A)  should be protected because their account is fully insured by the FDIC.
B)  can recover up to $20,000,but they will probably lose the rest since their deposits exceed the maximum coverage offered by the FDIC.
C)  will lose their savings because the FDIC only insures business deposits.
D)  will be eligible to recover 80 percent of the value of their deposit,less a $2,500 deductible.E) A) and B)
F) None of the above

Question 10

Which of the following accurately presents a major difference between Internet banks and traditional banks?

Accepted Answer

A)  The government does not regulate Internet banks.
B)  Traditional banks are prohibited from having ATMs.
C)  Internet banks have lower overhead costs.
D)  Traditional banks offer less personal care and attention to customers.E) B) and C)
F) A) and D)

Question 11

The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations.

Accepted Answer

A) True 
 B)False

Question 12

The federal funds rate is the interest rate that banks charge each other.

Accepted Answer

A) True 
 B)False

Question 13

International bankers make loans wherever they can get the maximum return for their money.

Accepted Answer

A) True 
 B)False

Question 14

Created during the Great Depression,the federal deposit insurance program resulted in a large number of bank failures.

Accepted Answer

A) True 
 B)False

Question 15

Abdul Industries wants to import some heavy machinery from a producer located in the Czech Republic.To facilitate payment to the Czech firm,Abdul arranged for its bank to issue a banker's acceptance.Under this arrangement,the bank pays the exporter after the equipment passes inspection.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following represents the technical name for a checking account?

Accepted Answer

A)  Free deposit
B)  Variable annuity
C)  Demand deposit
D)  Certificate of depositE) A) and D)
F) All of the above

Question 17

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Accepted Answer

A)  Internet banks provide their customers a greater sense of security.
B)  Traditional banks charge lower prices for financial services.
C)  Internet banks have lower overhead costs.
D)  Traditional banks offer the electronic transfer of customer funds.E) All of the above
F) A) and D)

Question 18

A savings and loan association S&L)is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.

Accepted Answer

A) True 
 B)False

Question 19

To decrease the money supply,the Federal Reserve sells U.S.government bonds in open-market operations.

Accepted Answer

A) True 
 B)False

Question 20

__________ are nonprofit,member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.

Accepted Answer

A)  Mutual thrift associations
B)  Credit unions
C)  Commercial banks
D)  Mutual fund companiesE) A) and B)
F) A) and C)

Exam 20: Money,financial Institutions,and the Federal Reserve

After Bill and Jillian deposited nearly $30,000 in a savings account at Farmers National Bank,the bank failed and filed for bankruptcy.Because the Farmers National Bank was an FDIC member bank,Bill and Jillian's savings:

Correct AnswerverifiedShow Answer

An electronic funds transfer system EFT)is an electronic transaction system used for paying bills,making direct deposits of paychecks,and paying for a purchase.

Correct AnswerverifiedShow Answer

Abdul Industries wants to import some heavy machinery from a producer located in the Czech Republic.To facilitate payment to the Czech firm,Abdul arranged for its bank to issue a banker's acceptance.Under this arrangement,the bank pays the exporter after the equipment passes inspection.

Correct AnswerverifiedShow Answer

A savings and loan association S&L)is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.

Correct AnswerverifiedShow Answer

The Federal Reserve represents a "bankers' bank" because:

Correct AnswerverifiedShow Answer

A series of bank failures and a cash shortage in 1907 led to the establishment of the Federal Reserve System in 1913.

Correct AnswerverifiedShow Answer

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Correct AnswerverifiedShow Answer

International bankers make loans wherever they can get the maximum return for their money.

Correct AnswerverifiedShow Answer

A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that banks charge each other.

Correct AnswerverifiedShow Answer

Although there are many features about online banking that customers do not care for,they are seldom concerned with the security due to continued assurances by the banking industry.

Correct AnswerverifiedShow Answer

The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations.

Correct AnswerverifiedShow Answer

The Federal Reserve System consists of ________ Federal Reserve banks.

Correct AnswerverifiedShow Answer

Created during the Great Depression,the federal deposit insurance program resulted in a large number of bank failures.

Correct AnswerverifiedShow Answer

Which of the following represents the technical name for a checking account?

Correct AnswerverifiedShow Answer

Which of the following accurately presents a major difference between Internet banks and traditional banks?

Correct AnswerverifiedShow Answer

__________ are nonprofit,member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.

Correct AnswerverifiedShow Answer

Most countries restrict the flow of money in and out of their borders.

Correct AnswerverifiedShow Answer

To decrease the money supply,the Federal Reserve sells U.S.government bonds in open-market operations.

Correct AnswerverifiedShow Answer

The __________ primarily provides for the financing of economic development projects throughout the world.

Correct AnswerverifiedShow Answer

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