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

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Question 101

True/False

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According to the "Spotlight on Small Business" box in Chapter 20, as a result of the recent recession, banks have become much more lenient in their lending policies.

A) True
B) False

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Question 102

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Which of the following represents a nonbank?

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

E) C) and D)
F) A) and B)

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Question 103

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Credit unions represent nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members.

Many employers offer direct deposit, as a convenient and cost savings method of distributing employee pay each month.

The World Bank primarily finances projects to protect the environment.

After years of banking with Quality Bank and Trust, Saul decided to switch to a competing institution. Thanks to changes in government regulation, his search will uncover a variety of options, however, he will also learn that banks and nonbanks have merged in order to be more competitive in the banking and financial services industries, which may or may not increase his options.

Lower fees and better interest rates motivate customers to open accounts with Internet banks. However, the lack of personal service and concern for information security encourages some customers to return to a traditional bank.

The U.S. government has done its best to create dollar bills that are easily duplicated.

Although there are many new ways to perform electronic funds transfer, legally, the only way that an employer can pay an employee is by writing a check.

Due to the fact that investors did not individually purchase MBSs (mortgage backed securities) in their investment accounts, they remained unaffected when the value of some of these investments became worthless.

The people living on the island nation of Wacki-ki readily accept a certain type of seashell as payment for the goods and services they trade. For Wackians (the name of Wacki-ki natives), seashells serve as money.

The IMF's goal is to maintain a global monetary system.

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.

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) :

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

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

When Mrs. Sweet exchanges her famous chocolate chip cookies for the lawn care services of her neighbor, she engages in a barter transaction.

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

Companies are now developing ways to send money across national boundaries using mobile phones.

Savings and loan associations, also known as thrift institutions, were created to promote consumer thrift and home ownership.