Question 1

Which of the following helps to provide for the smooth flow of money between nations?

Accepted Answer

A)   International Monetary Fund
B)   Foreign Exchange Bank
C)   World Bank
D)   International Exchange CenterE) B) and D)
F) A) and B)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

The __________ insures deposits held in credit unions.

Accepted Answer

A)   Federal Credit Insurance Agency (FCI
A)  
B)   Credit Union Insurance Fund (CUIF) 
C)   Federal Deposit Insurance Corporation (FDI
C)  
D)   National Credit Union Administration (NCU
A)  E) All of the above
F) B) and C)

Question 4

In the 1930s,during the Great Depression,the government started an insurance program to protect the public from bank failures.

Accepted Answer

A) True 
 B)False

Question 5

The Federal Reserve System enabled the U.S.economy to avoid serious banking problems during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 6

Herb has $20,000 in an interest-bearing time deposit with the Applebottom Bank and Trust Company.While earning a relatively attractive rate of interest,Herb had to agree to not withdraw any of the funds until the end of a three-year period.Herb's investment represents a(n) :

Accepted Answer

A)   passbook savings account.
B)   negotiable order of withdrawal (NOW) account.
C)   individual deferred earnings account (IDE
A)  .
D)   certificate of deposit (C
D)  .E) A) and B)
F) A) and C)

Question 7

Companies are now developing ways to send money across national boundaries using e-cash.

Accepted Answer

A) True 
 B)False

Question 8

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) None of the above
F) B) and C)

Question 9

Which of the following represents a nonbank?

Accepted Answer

A)   Life insurance companies
B)   Savings and loan associations
C)   Credit unions
D)   Thrift institutionsE) A) and B)
F) A) and C)

Question 10

When the Fed buys U.S.government securities,the:

Accepted Answer

A)   size of the federal deficit falls.
B)   discount rate rises.
C)   money supply increases.
D)   banking system loses reserves.E) C) and D)
F) B) and C)

Question 11

The ________ provides the same results as a check because it withdraws funds from a checking account.

Accepted Answer

A)   credit card
B)   debit card
C)   smart card
D)   cashier's checkE) All of the above
F) B) and C)

Question 12

Tracing the cause of the recent banking crisis,which of the following organizations 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) C) and D)

Question 13

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) A) and D)

Question 14

The reserve requirement represents the interest rate charged by the Federal Reserve for government guaranteed student loans.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

GO-tags,a new product introduced by First Data,Inc.sports a small chip with a radio-transmitter that permits the user to tap a small card against a machine and transfer funds from the card to the vendor's account.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Accepted Answer

A)   Internet banks provide their customers a greater sense of security.
B)   Traditional banks charge lower prices for financial services.
C)   Internet banks have lower overhead costs.
D)   Traditional banks offer the electronic transfer of customer funds.E) B) and C)
F) B) and D)

Question 18

A demand deposit is the technical name for a checking account.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following represents one way the Fed increases the amount of money in circulation?

Accepted Answer

A)   Reduce taxes
B)   Raise the discount rate
C)   Buy government securities
D)   Increase the reserve requirementE) None of the above
F) All of the above

Question 20

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

Accepted Answer

A) True 
 B)False

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following represents one way the Fed increases the amount of money in circulation?

Correct AnswerverifiedShow Answer

A demand deposit is the technical name for a checking account.

Correct AnswerverifiedShow Answer

The purpose of creating the FDIC was to:

Correct AnswerverifiedShow Answer

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Correct AnswerverifiedShow Answer

When the Fed buys U.S.government securities,the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The reserve requirement represents the interest rate charged by the Federal Reserve for government guaranteed student loans.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following represents a nonbank?

Correct AnswerverifiedShow Answer

The ________ provides the same results as a check because it withdraws funds from a checking account.

Correct AnswerverifiedShow Answer

GO-tags,a new product introduced by First Data,Inc.sports a small chip with a radio-transmitter that permits the user to tap a small card against a machine and transfer funds from the card to the vendor's account.

Correct AnswerverifiedShow Answer

Which of the following helps to provide for the smooth flow of money between nations?

Correct AnswerverifiedShow Answer

Herb has $20,000 in an interest-bearing time deposit with the Applebottom Bank and Trust Company.While earning a relatively attractive rate of interest,Herb had to agree to not withdraw any of the funds until the end of a three-year period.Herb's investment represents a(n) :

Correct AnswerverifiedShow Answer

The __________ insures deposits held in credit unions.

Correct AnswerverifiedShow Answer

Companies are now developing ways to send money across national boundaries using e-cash.

Correct AnswerverifiedShow Answer

The Federal Reserve System enabled the U.S.economy to avoid serious banking problems during the Great Depression.

Correct AnswerverifiedShow Answer

In the 1930s,during the Great Depression,the government started an insurance program to protect the public from bank failures.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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