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

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Question 51

True/False

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In the 1930s, during the Great Depression, the government started an insurance program to protect the public from bank failures.

A) True
B) False

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Question 52

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Although there are many new ways to perform electronic funds transfer, legally, the only way that an employer can pay an employee is by writing a check.

A) True
B) False

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Question 53

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Bryan searched for a new bank prior to filling out his direct deposit form at his new employer. He noted that 2-4-7 Bank offered higher interest rates on savings accounts and money market accounts; and it offered other amenities such as online banking and funds transfer that many traditional banks offer. What is the most logical reason that 2-4-7 Bank can compete for customers by offering higher interest rates?

The World Bank's mission is to lend money to developing nations to help boost their economic development in various industries. Since its inception, the World Bank has taken significant criticism of its programs. Farmers in a cooperative in the developing nation of Forlornia have benefited by World Bank loans. Most recently, however, their processing facilities that employ several laborers are taking criticism from human rights organizations. After studying this chapter, which of the following is a common criticism of these groups?

A debit card is better than a credit card because it allows the purchaser to float a short-term loan, until the credit card company sends the bills at the end of the month.

Brendan travels extensively for his company. He stays at hotels that provide him with a(n) ________ that is imbedded with his personal information as well as a code to unlock his hotel room.

A rapid increase in the money supply may lead to a(n)

Recently, the Fed announced a reduction in the discount rate and the reserve requirement. These actions clearly suggest that the Fed intends to decrease the money supply.

According to the Adapting to Change box, a Harvard professor is suggesting we should carry around more large bills, like $50s and $100s, in our wallets.

Timothy has $42,000 in a savings account with the Jefferson Credit Union. While economic conditions have caused financial institutions to struggle, Timothy feels that his money is safe due to the fact that the credit union's accounts are protected by the

Tee Time Golf Resort plans to carry an inventory of golf clubs from a German manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Tee Time's golf season at its St. Louis course. In order to prudently watch cash flow, you have recommended that Tee Time Resort sign a letter of credit with an international bank asking the bank to disburse payment when the clubs arrive at the St. Louis course and after they are inspected.

When the U.S. was still a colony of Great Britain, land banks were created to lend money to farmers.

The Federal Reserve System consists of ________ Federal Reserve banks.

Yesterday it was reported that the U.S. was clearly experiencing an economic downturn. A strategy the Fed may enact if the nation is facing recession is to buy government securities in open-market operations.

More than ever, the American economy operates as a distinctly separate entity from the international economy.

Smart cards contain a microprocessor chip that stores information about the user, such as driver's license data and bank balance.

When the Fed increases the reserve requirement, banks make fewer loans.

Because they charge higher interest rates, commercial and consumer finance companies often fail to attract borrowers.

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

The banking panic of 1907 and the resulting cash shortage led to the formation of the