Question 1

Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services.

Accepted Answer

A) True 
 B)False

Question 2

The Fed has just reduced the reserve requirement from 14% to 12%. Commerce Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $91 million in reserves.

Accepted Answer

A) True 
 B)False

Question 3

The people living on the island nation of Wacki-ki readily accept a certain type of seashell as payment for the goods and services they trade. For Wackians (the name of Wacki-ki natives), seashells serve as money.

Accepted Answer

A) True 
 B)False

Question 4

The International Monetary Fund assists with the smooth flow of money among nations.

Accepted Answer

A) True 
 B)False

Question 5

The technical name for a savings account is a:

Accepted Answer

A)   time deposit.
B)   demand deposit.
C)   deferred account.
D)   retained income account.E) None of the above
F) All of the above

Question 6

Tracing the causes of the recent banking crisis, which of the following organizations' activities is not in the news as having been a contributor to the crisis?

Accepted Answer

A)   The Federal Reserve suppressed interest rates which made it easier for prospective home owners and others to get loans.
B)   Congress promoted questionable loans.
C)   Banks dealt in MBSs (Mortgage Backed Securities)  that were not as safe as assumed.
D)   Pension funds invested in risky investments.E) A) and B)
F) B) and D)

Question 7

An increase in the rate of inflation would likely result from a(n) :

Accepted Answer

A)   decrease in spending by the federal government.
B)   rise in the unemployment rate.
C)   rise in interest rates.
D)   increase in the supply of money in circulation.E) B) and C)
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The Fed commonly buys or sells U.S. government securities to regulate the money supply.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Both the M-1 and M-2 definitions of money include coins and paper money.

Accepted Answer

A) True 
 B)False

Question 12

Savings and loan associations are sometimes known as:

Accepted Answer

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

Question 13

Louis owns an import business. After traveling to France on numerous occasions, he developed a taste for fine French wines. A radio report that he heard this morning indicated that the dollar has fallen sharply against the euro. Based on this information, Louis expects that:

Accepted Answer

A)   American goods will become more expensive in France.
B)   French wines will become more expensive in the United States.
C)   French wines will become less expensive in the United States.
D)   the French government will place an embargo on American exports.E) A) and B)
F) All of the above

Question 14

Alfredo banks at a commercial bank that advertises its membership in the FDIC. This means that:

Accepted Answer

A)   the bank guarantees it will pay the highest possible interest rate on his savings.
B)   his money is insured by an independent agency of the federal government.
C)   his money is automatically invested in securities issued by the federal government.
D)   the bank is a member of a larger consortium of banks that will enable Alfredo to cash checks and obtain basic bank services in virtually any major city in the United States.E) All of the above
F) None of the above

Question 15

To reduce inflation, the Federal Reserve increases the discount rate.

Accepted Answer

A) True 
 B)False

Question 16

As nonprofit institutions, credit unions enjoy an exemption from federal income taxes.

Accepted Answer

A) True 
 B)False

Question 17

Economic growth and the creation of jobs depend on the availability of money.

Accepted Answer

A) True 
 B)False

Question 18

The Federal Deposit Insurance Corporation (FDIC)  operates as a(n) :

Accepted Answer

A)   department of the Federal Reserve System and sells insurance to mortgage holders.
B)   independent agency of the U.S. government, and sells insurance to banks.
C)   arm of the Department of the Treasury.
D)   private nonprofit cooperative operated by member banks, offering insurance premiums for banking clients.E) A) and C)
F) A) and D)

Question 19

Bob read a newspaper story that indicated a dramatic increase in money market accounts and certificates of deposit during the last three months. The story reported that all other major components of the U.S. money supply remained unchanged. Based on this information, Bob can conclude that for the past quarter:

Accepted Answer

A)   both the M-1 and M-2 money supplies were stable.
B)   the M-1 money supply has increased, but the M-2 money supply was stable.
C)   the M-2 money supply has increased, but the M-1 money supply was stable.
D)   both the M-1 and the M-2 money supplies have increased.E) A) and C)
F) A) and B)

Question 20

Which of the following is not included in the M-1 or M-2 definitions of the money supply?

Accepted Answer

A)   Savings account deposits
B)   Gold
C)   Checking account deposits
D)   CurrencyE) A) and C)
F) A) and D)

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

Savings and loan associations are sometimes known as:

Correct Answer
verified

The Fed commonly buys or sells U.S. government securities to regulate the money supply.

Correct Answer
verified

The Fed has just reduced the reserve requirement from 14% to 12%. Commerce Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $91 million in reserves.

Correct Answer
verified

The people living on the island nation of Wacki-ki readily accept a certain type of seashell as payment for the goods and services they trade. For Wackians (the name of Wacki-ki natives), seashells serve as money.

Correct Answer
verified

The Federal Deposit Insurance Corporation (FDIC) operates as a(n) :

Correct Answer
verified

As nonprofit institutions, credit unions enjoy an exemption from federal income taxes.

Correct Answer
verified

Tracing the causes of the recent banking crisis, which of the following organizations' activities is not in the news as having been a contributor to the crisis?

Correct Answer
verified

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

Correct Answer
verified

Alfredo banks at a commercial bank that advertises its membership in the FDIC. This means that:

Correct Answer
verified

Which of the following is not included in the M-1 or M-2 definitions of the money supply?

Correct Answer
verified

To reduce inflation, the Federal Reserve increases the discount rate.

Correct Answer
verified

Correct Answer
verified

Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services.

Correct Answer
verified

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

Correct Answer
verified

The International Monetary Fund assists with the smooth flow of money among nations.

Correct Answer
verified

Louis owns an import business. After traveling to France on numerous occasions, he developed a taste for fine French wines. A radio report that he heard this morning indicated that the dollar has fallen sharply against the euro. Based on this information, Louis expects that:

Correct Answer
verified

Both the M-1 and M-2 definitions of money include coins and paper money.

Correct Answer
verified

The technical name for a savings account is a:

Correct Answer
verified

An increase in the rate of inflation would likely result from a(n) :

Correct Answer
verified

Economic growth and the creation of jobs depend on the availability of money.

Correct Answer
verified

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

Savings and loan associations are sometimes known as:

Correct AnswerverifiedShow Answer

The Fed commonly buys or sells U.S. government securities to regulate the money supply.

Correct AnswerverifiedShow Answer

The Fed has just reduced the reserve requirement from 14% to 12%. Commerce Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $91 million in reserves.

Correct AnswerverifiedShow Answer

The people living on the island nation of Wacki-ki readily accept a certain type of seashell as payment for the goods and services they trade. For Wackians (the name of Wacki-ki natives), seashells serve as money.

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation (FDIC) operates as a(n) :

Correct AnswerverifiedShow Answer

As nonprofit institutions, credit unions enjoy an exemption from federal income taxes.

Correct AnswerverifiedShow Answer

Tracing the causes of the recent banking crisis, which of the following organizations' activities is not in the news as having been a contributor to the crisis?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Alfredo banks at a commercial bank that advertises its membership in the FDIC. This means that:

Correct AnswerverifiedShow Answer

Which of the following is not included in the M-1 or M-2 definitions of the money supply?

Correct AnswerverifiedShow Answer

To reduce inflation, the Federal Reserve increases the discount rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The International Monetary Fund assists with the smooth flow of money among nations.

Correct AnswerverifiedShow Answer

Louis owns an import business. After traveling to France on numerous occasions, he developed a taste for fine French wines. A radio report that he heard this morning indicated that the dollar has fallen sharply against the euro. Based on this information, Louis expects that:

Correct AnswerverifiedShow Answer

Both the M-1 and M-2 definitions of money include coins and paper money.

Correct AnswerverifiedShow Answer

The technical name for a savings account is a:

Correct AnswerverifiedShow Answer

An increase in the rate of inflation would likely result from a(n) :

Correct AnswerverifiedShow Answer

Economic growth and the creation of jobs depend on the availability of money.

Correct AnswerverifiedShow Answer

Correct Answer
verified

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