Question 1

Which of the following represents a benefit of coins over paper money?

Accepted Answer

A)   improved portability
B)   increased divisibility
C)   enhanced stability
D)   improved durabilityE) All of the above
F) A) and D)

Question 2

Next month, Bigbux 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. Bigbux will charge the customer an interest amount greater than the discount rate.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements best summarizes the difference between M-1 and M-2?

Accepted Answer

A)   The M-1 definition of the money supply includes only domestic currencies while the M-2 definition includes foreign currencies.
B)   The M-1 definition consists of hard currencies which are backed by gold and silver, while M-2 consists of soft currencies which are not backed by gold and silver.
C)   The M-2 definition includes everything in the M-1 definition, plus additional components such as money in savings accounts, money market accounts, and certificates of deposit.
D)   The M-1 money supply consists only of the currency (coins and paper money)  that circulates in our economy, while the M-2 includes traveler's checks and funds in demand deposits.E) None of the above
F) A) and D)

Question 4

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met.

Accepted Answer

A) True 
 B)False

Question 7

Savings and loan associations are sometimes known as

Accepted Answer

A)   nonbanks.
B)   thrift institutions.
C)   credit unions.
D)   bankers' banks.E) All of the above
F) B) and C)

Question 8

Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership.

Accepted Answer

A) True 
 B)False

Question 9

As a response to the bank failures of the ________, a system of federal deposit insurance was established to strengthen the banking system.

Accepted Answer

A)   Civil War
B)   wildcat banking crisis of the 1880s
C)   Great Depression
D)   banking crisis of the early 1980sE) A) and D)
F) B) and D)

Question 10

Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings.

Accepted Answer

A) True 
 B)False

Question 11

A ________ represents an unconditional agreement by a bank to pay a specified amount at a particular time.

Accepted Answer

A)   certified trade acceptance
B)   banker's acceptance
C)   letter of credit
D)   guaranteed funds agreementE) B) and C)
F) A) and C)

Question 12

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

Question 13

Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another.

Accepted Answer

A) True 
 B)False

Question 14

The ________ category of money supply includes money that is quickly and easily accessed.

Accepted Answer

A)   e-cash
B)   M-3
C)   M-2
D)   M-1E) All of the above
F) A) and B)

Question 15

By the time of the Civil War, the U.S. banking system operated

Accepted Answer

A)   as an efficient model that many other countries copied.
B)   under the control of the first Federal Reserve System.
C)   inefficiently with different banks issuing different types of currencies.
D)   much the same as it does today.E) A) and D)
F) A) and C)

Question 16

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) A) and B)
F) C) and D)

Question 17

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

Accepted Answer

A)   The government does not regulate online banks.
B)   Traditional banks are prohibited from having ATMs.
C)   Online banks have lower overhead costs.
D)   Traditional banks offer less personal care and attention to customers.E) None of the above
F) A) and B)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Alexander Hamilton persuaded Congress to create a central bank.

Accepted Answer

A) True 
 B)False

Question 20

Technically, a bank can require depositors to give prior notice before they withdraw funds from time deposits.

Accepted Answer

A) True 
 B)False

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

Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership.

Correct AnswerverifiedShow Answer

Which of the following represents a benefit of coins over paper money?

Correct AnswerverifiedShow Answer

Next month, Bigbux 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. Bigbux will charge the customer an interest amount greater than the discount rate.

Correct AnswerverifiedShow Answer

A banker's acceptance represents a promise that a bank will pay a specified amount at a specified time if certain conditions are met.

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Alexander Hamilton persuaded Congress to create a central bank.

Correct AnswerverifiedShow Answer

Commercial and consumer finance companies specialize in making low-interest loans to individuals and businesses with strong credit ratings.

Correct AnswerverifiedShow Answer

Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another.

Correct AnswerverifiedShow Answer

Which of the following statements best summarizes the difference between M-1 and M-2?

Correct AnswerverifiedShow Answer

A ________ represents an unconditional agreement by a bank to pay a specified amount at a particular time.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

By the time of the Civil War, the U.S. banking system operated

Correct AnswerverifiedShow Answer

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Correct AnswerverifiedShow Answer

Savings and loan associations are sometimes known as

Correct AnswerverifiedShow Answer

The ________ category of money supply includes money that is quickly and easily accessed.

Correct AnswerverifiedShow Answer

Technically, a bank can require depositors to give prior notice before they withdraw funds from time deposits.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As a response to the bank failures of the ________, a system of federal deposit insurance was established to strengthen the banking system.

Correct AnswerverifiedShow Answer

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