Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

Created during the Great Depression,the federal deposit insurance program resulted in a large number of bank failures.

Accepted Answer

A) True 
 B)False

Question 3

The strength of the U.S.money system rests on the silver content of the coins.

Accepted Answer

A) True 
 B)False

Question 4

While credit cards increase the number of checks written,they lower the costs of processing those checks.

Accepted Answer

A) True 
 B)False

Question 5

Commercial banks offer services to depositors and borrowers.

Accepted Answer

A) True 
 B)False

Question 6

Smart cards contain a microprocessor chip that stores information about the user,such as drivers' license data and bank balance.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

How did banks contribute to the recent financial crisis?

Accepted Answer

A)   They began to offer investment products other than demand and time deposits.
B)   They provided loans higher than the discount rate.
C)   They made risky loans and then created mortgage backed securities from the assets they held.
D)   They refused to sell anything other than fixed-rate mortgages.E) B) and C)
F) A) and C)

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

A direct payment is a pre-authorized electronic payment.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following represents the technical name for a checking account?

Accepted Answer

A)   Free deposit
B)   Variable annuity
C)   Demand deposit
D)   Certificate of depositE) All of the above
F) A) and B)

Question 12

Which of the following historical events motivated Congress to establish the Federal Reserve System?

Accepted Answer

A)   The significant outflow of gold during the Civil War
B)   The collapse of the Second National Bank of the United States
C)   The banking panic and cash shortage of 1907
D)   The Great DepressionE) B) and D)
F) C) and D)

Question 13

A savings account represents a demand deposit.

Accepted Answer

A) True 
 B)False

Question 14

The Federal Reserve represents a "bankers' bank" because:

Accepted Answer

A)   it was created as a central clearinghouse for the transactions of the largest banks.
B)   commercial banks compete with the FED for business customers.
C)   it lobbies Congress in support of banking reform legislation.
D)   it holds the deposits of commercial banks and makes loans to banks that need additional funds.E) All of the above
F) A) and D)

Question 15

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 C)
F) None of the above

Question 16

Tim travels extensively on business.Most of the hotels where he stays provide him with a card that unlocks his room.The card is keyed to the particular lock that matches the lock on the assigned room,and also contains information about Tim.The type of card that Tim is using is a smart card.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Internet banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Recently,the Fed announced a reduction in the discount rate and the reserve requirement.These actions clearly suggest that the Fed intends to decrease the money supply.

Accepted Answer

A) True 
 B)False

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

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

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.

Correct AnswerverifiedShow Answer

Which of the following historical events motivated Congress to establish the Federal Reserve System?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

While credit cards increase the number of checks written,they lower the costs of processing those checks.

Correct AnswerverifiedShow Answer

Smart cards contain a microprocessor chip that stores information about the user,such as drivers' license data and bank balance.

Correct AnswerverifiedShow Answer

The Federal Reserve represents a "bankers' bank" because:

Correct AnswerverifiedShow Answer

A direct payment is a pre-authorized electronic payment.

Correct AnswerverifiedShow Answer

Created during the Great Depression,the federal deposit insurance program resulted in a large number of bank failures.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following represents the technical name for a checking account?

Correct AnswerverifiedShow Answer

A savings account represents a demand deposit.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

How did banks contribute to the recent financial crisis?

Correct AnswerverifiedShow Answer

Recently,the Fed announced a reduction in the discount rate and the reserve requirement.These actions clearly suggest that the Fed intends to decrease the money supply.

Correct AnswerverifiedShow Answer

Tim travels extensively on business.Most of the hotels where he stays provide him with a card that unlocks his room.The card is keyed to the particular lock that matches the lock on the assigned room,and also contains information about Tim.The type of card that Tim is using is a smart card.

Correct AnswerverifiedShow Answer

Internet banks offer customers better interest rates and lower fees because these businesses avoid the costs of constructing and maintaining a bank building.

Correct AnswerverifiedShow Answer

The strength of the U.S.money system rests on the silver content of the coins.

Correct AnswerverifiedShow Answer

Commercial banks offer services to depositors and borrowers.

Correct AnswerverifiedShow Answer

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