Question 1

Which of the following represents a nonbank?

Accepted Answer

A)   life insurance companies
B)   savings and loan associations
C)   credit unions
D)   thrift institutionsE) All of the above
F) A) and C)

Question 2

Arturo owns an import business. After traveling to Spain on numerous occasions, he developed a taste for the local wines. An online article he read this morning suggested that the dollar has fallen sharply against the euro. Based on this information, Arturo expects that

Accepted Answer

A)   American goods will become more expensive in Spain.
B)   Spanish wines will become more expensive in the United States.
C)   Spanish wines will become less expensive in the United States.
D)   the Spanish government will place an embargo on American exports.E) A) and B)
F) B) and D)

Question 3

Economic events in other nations seldom impact the powerful U.S. economy.

Accepted Answer

A) True 
 B)False

Question 4

The federal funds rate is the interest rate that banks charge each other.

Accepted Answer

A) True 
 B)False

Question 5

The Fed has just reduced the reserve requirement from 14% to 12%. Bigbux Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $78 million in reserves.

Accepted Answer

A) True 
 B)False

Question 6

On payday, employers can designate their banks to electronically transfer funds from the business's checking account to the employees' checking account. This represents an example of a(n)

Accepted Answer

A)   debit card system.
B)   check kiting system.
C)   electronic check conversion.
D)   direct deposit.E) B) and D)
F) A) and C)

Question 7

Thanks in part to the Federal Reserve System, few banks failed during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 8

When the value of the dollar increases relative to the euro, the number of U.S. dollars needed to purchase a block of Dutch cheese increases.

Accepted Answer

A) True 
 B)False

Question 9

A savings and loan association (S&L) is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The U.S. government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.

Accepted Answer

A) True 
 B)False

Question 12

A significant decrease in the money supply tends to

Accepted Answer

A)   reduce the supply of gold held by the federal government.
B)   create shortages that would cause prices of goods and services to rise.
C)   send the economy into a recession.
D)   reduce the size of the federal government's deficit.E) A) and C)
F) A) and B)

Question 13

Electronic money is a newer form of money.

Accepted Answer

A) True 
 B)False

Question 14

Commercial banks, savings and loan associations, and credit unions

Accepted Answer

A)   specialize solely in loaning money for home mortgages.
B)   operate as nonprofit organizations.
C)   deposit their excess funds with the U.S. Treasury.
D)   accept deposits and make loans.E) C) and D)
F) B) and C)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Depositors represent a bank's primary responsibility, while borrowing customers are secondary.

Accepted Answer

A) True 
 B)False

Question 17

The FDIC traditionally protects depositors up to $250,000 per account.

Accepted Answer

A) True 
 B)False

Question 18

The International Monetary Fund does not lend money.

Accepted Answer

A) True 
 B)False

Question 19

The ability to access funds without a penalty helps to explain why certificates of deposit (CDs) have gained popularity among conservative investors and savers.

Accepted Answer

A) True 
 B)False

Question 20

The president of the United States 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

The Fed has just reduced the reserve requirement from 14% to 12%. Bigbux Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $78 million in reserves.

Correct AnswerverifiedShow Answer

The ability to access funds without a penalty helps to explain why certificates of deposit (CDs) have gained popularity among conservative investors and savers.

Correct AnswerverifiedShow Answer

A significant decrease in the money supply tends to

Correct AnswerverifiedShow Answer

The U.S. government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.

Correct AnswerverifiedShow Answer

Electronic money is a newer form of money.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The FDIC traditionally protects depositors up to $250,000 per account.

Correct AnswerverifiedShow Answer

The president of the United States appoints the members of the Federal Reserve's board of governors.

Correct AnswerverifiedShow Answer

When the value of the dollar increases relative to the euro, the number of U.S. dollars needed to purchase a block of Dutch cheese increases.

Correct AnswerverifiedShow Answer

Commercial banks, savings and loan associations, and credit unions

Correct AnswerverifiedShow Answer

On payday, employers can designate their banks to electronically transfer funds from the business's checking account to the employees' checking account. This represents an example of a(n)

Correct AnswerverifiedShow Answer

Arturo owns an import business. After traveling to Spain on numerous occasions, he developed a taste for the local wines. An online article he read this morning suggested that the dollar has fallen sharply against the euro. Based on this information, Arturo expects that

Correct AnswerverifiedShow Answer

A savings and loan association (S&L) is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.

Correct AnswerverifiedShow Answer

Thanks in part to the Federal Reserve System, few banks failed during the Great Depression.

Correct AnswerverifiedShow Answer

Depositors represent a bank's primary responsibility, while borrowing customers are secondary.

Correct AnswerverifiedShow Answer

Which of the following represents a nonbank?

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that banks charge each other.

Correct AnswerverifiedShow Answer

The International Monetary Fund does not lend money.

Correct AnswerverifiedShow Answer

Economic events in other nations seldom impact the powerful U.S. economy.

Correct AnswerverifiedShow Answer

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