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

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Question 151

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

A) True
B) False

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Question 152

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Efficient monetary systems eliminate the use of barter.

A) True
B) False

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Question 153

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Prior to the establishment of the Federal Reserve System in 1913, the United States had no experience with a central bank.

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

Tee Time Golf Resort plans to use famous Kauri wood from New Zealand for parts of the interior of the magnificent clubhouse at its new golf resort near Salem, OR. According to the importer, each 10-foot slab will cost Tee Time approximately $5,000. Looking at the exchange rates, Tee Time's finance director noted that $500 US dollars = $738 NZ dollars. The importer will order directly from his source in New Zealand. Tee Time's finance director has determined that

As is common payroll procedure for most employers, Penelope's company ________ her paycheck semimonthly into her checking account. This is a paperless process and no check is issued to the employee. By logging into her personnel system, Penelope has record of the net pay that was deposited into her personal checking account and an account of how much was taken out for taxes, Medicare, social security (FICA) , and other deductions. Penelope's company has adopted an efficient ________ system.

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

Existing regulations prohibit online banking activities unless the bank also operates a traditional brick-and-mortar facility.

When the Federal Reserve acts to reduce inflation, they decrease the reserve requirement.

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

Tee Time Golf Resort plans to carry an inventory of golf clubs from a German manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Tee Time's golf season at its St. Louis course. In order to prudently watch cash flow, you have recommended that Tee Time Resort sign a letter of credit with an international bank asking the bank to disburse payment when the clubs arrive at the St. Louis course and after they are inspected.

One thing is for certain, the average borrower's risk-averse behavior did not contribute to the problems that spiraled out of control and caused the recent banking crisis.

Electronic funds transfer (EFT) tools include debit cards, smart cards, direct deposit, direct payments, and electronic check conversion.

Citizens of the island nation of Winstone readily accept a specific type of seashell as payment for the goods and services they trade. For Winstonians, seashells serve as money.

Typically, banks impose a service charge for check-writing privileges or demand a minimum deposit.

When comparing a letter of credit and a banker's acceptance for financing international business transactions, a letter of credit

The FDIC exists to maintain the public's confidence in the banking system.

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.

The president of the island nation of Winstone refuses to raise taxes, but wants to expand many government services and increase the size of Winstone's armed forces. He plans to pay for all of the desired expenditures by printing more money. If the president carries out his plan by rapidly increasing the supply of money, Winstone will likely experience

The World Bank's mission is to lend money to developing nations to help boost their economic development in various industries. Since its inception, the World Bank has taken significant criticism of its programs. Farmers in a cooperative in the developing nation of Forlornia have benefited by World Bank loans. Most recently, however, their processing facilities that employ several laborers are taking criticism from human rights organizations. After studying this chapter, which of the following is a common criticism of these groups?