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

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Question 91

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The United States first established a central bank in 1913 by establishing the Federal Reserve System.

A) True
B) False

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Question 92

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Under the Federal Reserve Act of 1913,

A) membership in the Federal Reserve System was made voluntary for all banks.
B) federally chartered banks were required to join the Federal Reserve System.
C) membership in the Federal Reserve System was required of all banks that had deposits of more than $1 million.
D) all banks were required to hold reserves equal to at least 50 percent of their deposits.

E) All of the above
F) None of the above

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Question 93

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Commercial banks, savings and loan associations, and credit unions all represent components of the American banking system.

The goal of Federal Reserve monetary policy is to affect the level of competition in the U.S. banking system.

The M-1 definition of the money supply includes travelers' checks.

M-2 represents the most commonly used definition of the money supply.

Theoretically, with the proper monetary policy, the U.S. economy can continue to grow without causing inflation.

If the owners of Spokes Bicycles are trying to sell state-of-the-art bicycles into the Japanese market, they are likely to sell more bicycles if the dollar has strength against the Japanese yen.

Thomas Jefferson proposed the establishment of the first central bank in the United States.

Printed dollars are made with various lines of colors such as peach and blue. They have art work that is off-center, and there are other identifiable watermarks for the purpose of making replication quite easy.

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

The Federal Reserve assists in the processing of checks between banks.

The reserve requirement represents the Fed's most powerful tool for conducting monetary policy.

Prior to the Civil War, the United States had two unsuccessful attempts at a central bank.

Brokerage firms now compete with commercial banks by offering high-yield combination savings and checking accounts.

A letter of credit represents a promise that a bank will disburse a specified amount of funds at a particular time if certain conditions are met.

Commercial banks primarily serve two types of customers-

Given the size and strength of the U.S. economy and the widespread use of the dollar, the Federal Reserve essentially regulates international monetary markets.

The Federal Reserve requires that all commercial banks offer mobile deposits.

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