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

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Question 21

True/False

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High start-up costs cause Internet banks to have higher operating costs than traditional banks.

A) True
B) False

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Question 22

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Trading internationally by using money appears easy and almost effortless, but the fact is there is a very complex banking system that makes it happen.

A) True
B) False

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Question 23

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The President of the U.S appoints the members of the Federal Reserve's board of governors.

When the Fed increases the reserve requirement it forces banks to increase the number of loans they make.

The ___________ plays a role in making certain that checks clear and sellers get paid

Cory worries that his $7,537 in a checking account at the Lottadoe National Bank could be lost if the bank fails. Lottadoe is a FDIC (Federal Deposit Insurance Corporation) member bank, which insures Cory's account up to $250,000.

When the value of the euro increases compared to the U.S. dollar, the price of U.S. exports to Europe will decrease.

__________ currently provides for regulating international banking and finance practices

__________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans

Smart cards can allow the user to access secure areas within buildings or buy gas with the swipe of the card.

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

An electronic funds transfer system (EFT) is an electronic transaction system used for paying bills, making direct deposits of paychecks, and paying for a purchase.

Yesterday it was reported that the U.S. is 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.

The Federal Reserve establishes the tax policies of the U.S.

Designed to create more confidence in banking institutions, the FDIC was established:

Which of the following is a bank service provided to help companies conduct business in other countries?

The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations.

The ________ insures holders of accounts in savings and loan associations

____________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members

Mini-Case The Bank of Bramblewood survived the Great Depression through the dedication, hard work, and conservative practices of its first president, Red E. Kash. Indeed, Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president. After his retirement his granddaughter, Patty, took a position with the bank. Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank. Patty admits she owes a great deal to her grandfather's leadership and advice, but she also quickly points out that the banking industry has changed significantly since Red retired. Patty graduated from college with a degree in finance, and also holds several certifications with the American Institute of Banking. "What Granddad achieved during his era was truly remarkable," Patty points out. "But times have changed, and banking regulations and bank competitors have certainly changed. If we hope to prosper in this century we have to adjust to new competition, learn to work with new technologies, and take advantage of new opportunities. The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so. But we must serve them more efficiently and creatively than in the past." -During Red's time as head of the Bank of Bramblewood, the bank offered three services: time deposits, demand deposits, and home and business loans. Under Patty's leadership, the bank offers those same services, a variety of investment opportunities such as mutual funds and bonds, and ___________ through the Internet, which supports a number of services such as paying bills directly from customers' accounts, direct deposit, and transferring money.