Question 1

A more recent product of banks is checking accounts that pay interest to depositors.

Accepted Answer

A) True 
 B)False

Question 2

All federally chartered banks are members of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 3

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 4

The U.S. banking system includes insurance companies and pension funds.

Accepted Answer

A) True 
 B)False

Question 5

The United States first established a central bank in 1913 by establishing the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 6

The wave of bank failures during the Great Depression prompted the government to establish federal deposit insurance to protect the public from bank failures.

Accepted Answer

A) True 
 B)False

Question 7

Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another.

Accepted Answer

A) True 
 B)False

Question 8

A represents an unconditional agreement by a bank to pay a specified amount at a particular time.

Accepted Answer

A)  Certified trade acceptance
B)  Banker's acceptance
C)  Letter of credit
D)  Guaranteed funds agreementE) B) and D)
F) C) and D)

Question 9

A central bank allows individual banks to deposit and to borrow funds.

Accepted Answer

A) True 
 B)False

Question 10

Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets.

Accepted Answer

A) True 
 B)False

Question 11

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Accepted Answer

A) True 
 B)False

Question 12

A time deposit that earns interest is a .

Accepted Answer

A)  Certificate of deposit
B)  Passbook account
C)  Discount deposit
D)  NOW accountE) A) and D)
F) B) and C)

Question 13

The rate represents the interest rate charged by the Fed when loaning funds to member banks.

Accepted Answer

A)  discount
B)  prime
C)  federal funds
D)  reserveE) None of the above
F) A) and D)

Question 14

Cory worries that his $7,537 in a checking account at the Lottadoe National Bank could be lost if the bank fails. He should relax because his account is fully insured by the FDIC (Federal Deposit Insurance Corporation).

Accepted Answer

A) True 
 B)False

Question 15

The M-1 definition of the money supply includes travelers' checks.

Accepted Answer

A) True 
 B)False

Question 16

A saving account is also known as a time deposit.

Accepted Answer

A) True 
 B)False

Question 17

Alan works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Alan:

Accepted Answer

A)  must be aware of federal limits on the total amount of U.S. funds his bank can lend to foreign borrowers.
B)  can only make loans if his bank has funds in excess of those sought by American firms.
C)  is likely to approve loans to foreign borrowers if the return is high enough to justify the risk.
D)  must be careful to get approval from the International Monetary Fund.E) None of the above
F) A) and C)

Question 18

After Bill and Jillian deposited nearly $30,000 in a savings account at Farmers National Bank, the bank failed and filed for bankruptcy. Because the Farmers National Bank participates in the FDIC, Bill and Jillian:

Accepted Answer

A)  should be okay because their account is fully insured by the FDIC.
B)  can recover up to $20,000, but they will probably lose the rest since their deposits exceed the maximum coverage offered by the FDIC.
C)  will lose their savings because the FDIC only insures business deposits.
D)  will be eligible to recover 80 percent of the value of their deposit, less a $2,500 deductible.E) B) and C)
F) A) and D)

Question 19

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) All of the above
F) None of the above

Question 20

Newspapers in the nation of St. Lunatic report a significant increase in money supply during the past few months. This information indicates that St. Lunatic may experience a serious recession in the near future.

Accepted Answer

A) True 
 B)False

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

The technical name for a savings account is a:

Correct AnswerverifiedShow Answer

A more recent product of banks is checking accounts that pay interest to depositors.

Correct AnswerverifiedShow Answer

The wave of bank failures during the Great Depression prompted the government to establish federal deposit insurance to protect the public from bank failures.

Correct AnswerverifiedShow Answer

The rate represents the interest rate charged by the Fed when loaning funds to member banks.

Correct AnswerverifiedShow Answer

The U.S. banking system includes insurance companies and pension funds.

Correct AnswerverifiedShow Answer

A central bank allows individual banks to deposit and to borrow funds.

Correct AnswerverifiedShow Answer

A represents an unconditional agreement by a bank to pay a specified amount at a particular time.

Correct AnswerverifiedShow Answer

The United States first established a central bank in 1913 by establishing the Federal Reserve System.

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 time deposit that earns interest is a .

Correct AnswerverifiedShow Answer

After Bill and Jillian deposited nearly $30,000 in a savings account at Farmers National Bank, the bank failed and filed for bankruptcy. Because the Farmers National Bank participates in the FDIC, Bill and Jillian:

Correct AnswerverifiedShow Answer

Due to federal regulations limiting their investment opportunities, pension funds play a minor role in U.S. financial markets.

Correct AnswerverifiedShow Answer

A saving account is also known as a time deposit.

Correct AnswerverifiedShow Answer

Newspapers in the nation of St. Lunatic report a significant increase in money supply during the past few months. This information indicates that St. Lunatic may experience a serious recession in the near future.

Correct AnswerverifiedShow Answer

Banks help businesses operate in other countries by exchanging the currency of one nation for the currency of another.

Correct AnswerverifiedShow Answer

The M-1 definition of the money supply includes travelers' checks.

Correct AnswerverifiedShow Answer

Alan works as a loan officer for a major U.S. commercial bank, specializing in international loans. When considering loans to governments and businesses in other nations, Alan:

Correct AnswerverifiedShow Answer

Cory worries that his $7,537 in a checking account at the Lottadoe National Bank could be lost if the bank fails. He should relax because his account is fully insured by the FDIC (Federal Deposit Insurance Corporation).

Correct AnswerverifiedShow Answer

All federally chartered banks are members of the Federal Reserve.

Correct AnswerverifiedShow Answer

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Correct AnswerverifiedShow Answer

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