Question 1

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 2

Which of the following historical events motivated Congress to establish the Federal Reserve System?

Accepted Answer

A)   The significant outflow of gold during the Civil War
B)   The collapse of the Second National Bank of the United States
C)   The banking panic and cash shortage of 1907
D)   The Great DepressionE) All of the above
F) A) and C)

Question 3

The International Monetary Fund does not lend money.

Accepted Answer

A) True 
 B)False

Question 4

Early settlers of the New World relied heavily on barter because:

Accepted Answer

A)   they found barter more convenient than the use of money.
B)   strict laws limited the number of coins that could be brought into the colonies.
C)   money had not yet evolved.
D)   they wanted to protest against British control of the banking system.E) C) and D)
F) A) and B)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

They say "hindsight is 20/20," meaning you can usually see things more clearly, with a much better understanding, after events have occurred. We can say the same for the recent banking crisis. The practices of several participants (for-profit companies, government regulators, and customers) came together to create the crisis that caused the collapse of several banks, financial services companies, and corporations.

Accepted Answer

A) True 
 B)False

Question 7

Newspapers in the nation of St. Lunatic report a significant increase in money supply during the past few months. This information indicates that St. Lunatic may experience a serious recession in the near future.

Accepted Answer

A) True 
 B)False

Question 8

When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit:

Accepted Answer

A)   provides payment anywhere in the world. A banker's acceptance pays in areas in which the bank has a branch.
B)   pays a specified amount if certain conditions are met. Conversely, a banker's acceptance represents an unconditional promise to pay.
C)   requires both the buyer and seller to deal in the same currencies. A banker's acceptance provides for currency exchange.
D)   provides financing directly between buyers and sellers in different countries. A banker's acceptance provides an arrangement in which a bank serves as a broker taking title to the goods.E) C) and D)
F) B) and D)

Question 9

For banks, check-processing activities:

Accepted Answer

A)   still represent the cheapest way to permit customers use of their funds.
B)   are expensive and time consuming.
C)   are not trustworthy and reliable.
D)   are extremely efficient and have deterred customers from using other ways to access their funds.E) C) and D)
F) None of the above

Question 10

Next month, Commerce Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Commerce will charge the customer an interest amount greater than the discount rate.

Accepted Answer

A) True 
 B)False

Question 11

Springfield National Bank holds $200 million in deposits from their customers. If the Fed sets the reserve requirement at 12 percent, Springfield must hold $24 million in cash at the bank or in non-interest-bearing deposits at the local Federal Reserve district bank.

Accepted Answer

A) True 
 B)False

Question 12

The global money markets trade about $4 trillion every day.

Accepted Answer

A) True 
 B)False

Question 13

Efficient monetary systems eliminate the use of barter.

Accepted Answer

A) True 
 B)False

Question 14

The purpose of creating the FDIC was to:

Accepted Answer

A)   restore confidence in banking institutions.
B)   serve as clearinghouses for transactions involving commercial banks and savings and loans.
C)   provide federally guaranteed insurance to small businesses at low cost.
D)   help the Federal Reserve enforce reserve requirements.E) B) and C)
F) C) and D)

Question 15

Both checks and debit cards will immediately transfers funds from the customer's account to the seller's account.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   increase in the rate of inflation.
B)   recession.
C)   decrease in interest rates.
D)   decrease in spending by consumers and businesses.E) A) and B)
F) A) and C)

Question 17

Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because:

Accepted Answer

A)   traditional payments are subject to regulation by the Fed and electronic transactions are not.
B)   electronic funds are subject to a smaller reserve requirement than traditional funds.
C)   electronic funds transfer is more efficient and less expensive for banks than traditional check-based payments.
D)   the bank generates advertising revenue from its website.E) All of the above
F) C) and D)

Question 18

Which of the following is included in the M-2 definition of the money supply but not the M-1 definition?

Accepted Answer

A)   Currency
B)   Checking account deposits
C)   Traveler's checks
D)   Savings account depositsE) C) and D)
F) None of the above

Question 19

The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate.

Accepted Answer

A) True 
 B)False

Question 20

The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.

Accepted Answer

A) True 
 B)False

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

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

Correct Answer
verified

Both checks and debit cards will immediately transfers funds from the customer's account to the seller's account.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Springfield National Bank holds $200 million in deposits from their customers. If the Fed sets the reserve requirement at 12 percent, Springfield must hold $24 million in cash at the bank or in non-interest-bearing deposits at the local Federal Reserve district bank.

Correct Answer
verified

The International Monetary Fund does not lend money.

Correct Answer
verified

Next month, Commerce Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Commerce will charge the customer an interest amount greater than the discount rate.

Correct Answer
verified

The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate.

Correct Answer
verified

Newspapers in the nation of St. Lunatic report a significant increase in money supply during the past few months. This information indicates that St. Lunatic may experience a serious recession in the near future.

Correct Answer
verified

Which of the following historical events motivated Congress to establish the Federal Reserve System?

Correct Answer
verified

When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit:

Correct Answer
verified

Early settlers of the New World relied heavily on barter because:

Correct Answer
verified

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

Correct Answer
verified

Efficient monetary systems eliminate the use of barter.

Correct Answer
verified

The global money markets trade about $4 trillion every day.

Correct Answer
verified

The purpose of creating the FDIC was to:

Correct Answer
verified

Which of the following is included in the M-2 definition of the money supply but not the M-1 definition?

Correct Answer
verified

For banks, check-processing activities:

Correct Answer
verified

The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.

Correct Answer
verified

Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because:

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

Both checks and debit cards will immediately transfers funds from the customer's account to the seller's account.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Springfield National Bank holds $200 million in deposits from their customers. If the Fed sets the reserve requirement at 12 percent, Springfield must hold $24 million in cash at the bank or in non-interest-bearing deposits at the local Federal Reserve district bank.

Correct AnswerverifiedShow Answer

The International Monetary Fund does not lend money.

Correct AnswerverifiedShow Answer

Next month, Commerce Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Commerce will charge the customer an interest amount greater than the discount rate.

Correct AnswerverifiedShow Answer

The three basic tools the Fed uses to manage the money supply are reserve requirements, open-market operations, and the discount rate.

Correct AnswerverifiedShow Answer

Newspapers in the nation of St. Lunatic report a significant increase in money supply during the past few months. This information indicates that St. Lunatic may experience a serious recession in the near future.

Correct AnswerverifiedShow Answer

Which of the following historical events motivated Congress to establish the Federal Reserve System?

Correct AnswerverifiedShow Answer

When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit:

Correct AnswerverifiedShow Answer

Early settlers of the New World relied heavily on barter because:

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

Efficient monetary systems eliminate the use of barter.

Correct AnswerverifiedShow Answer

The global money markets trade about $4 trillion every day.

Correct AnswerverifiedShow Answer

The purpose of creating the FDIC was to:

Correct AnswerverifiedShow Answer

Which of the following is included in the M-2 definition of the money supply but not the M-1 definition?

Correct AnswerverifiedShow Answer

For banks, check-processing activities:

Correct AnswerverifiedShow Answer

The money supply represents the amount of money the Federal Reserve Bank makes available for people to buy goods and services.

Correct AnswerverifiedShow Answer

Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because:

Correct AnswerverifiedShow Answer

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