Question 1

A comparison of a interest bearing checking account and a savings account reveals that:

Accepted Answer

A)  while a NOW account pays interest, a savings account does not.
B)  a NOW account must be held to maturity, while funds in a savings account are available on demand.
C)  deposits in checking accounts are technically demand deposits, but deposits in savings accounts are time deposits.
D)  interest earned on NOW accounts is tax deductible, while interest earned on passbook savings accounts is taxable income.E) A) and B)
F) A) and C)

Question 2

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

Accepted Answer

A)  Annuity accounts
B)  Pension funds
C)  Individual retirement accounts
D)  Term-life retirement fundsE) All of the above
F) None of the above

Question 3

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Accepted Answer

A) True 
 B)False

Question 4

insures deposits held in credit unions.

Accepted Answer

A)  Federal Credit Insurance Agency (FCI
A)  
B)  Credit Union Insurance Fund (CUIF) 
C)  Federal Deposit Insurance Corporation (FDI
C)  
D)  National Credit Union Administration (NCU
A)  E) B) and D)
F) A) and B)

Question 5

Several European countries report a significant decrease in the level of jobs, income, and production of goods and services. The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.

Accepted Answer

A) True 
 B)False

Question 6

The Federal Reserve requires that ATM machines be located within 100 yards of a commercial bank.

Accepted Answer

A) True 
 B)False

Question 7

When the value of the U.S. dollar increases relative to other currencies:

Accepted Answer

A)  the rate of inflation increases.
B)  the size of the national debt decreases.
C)  foreign goods become less expensive to U.S. consumers.
D)  U.S. goods become less expensive to foreign buyers.E) B) and D)
F) B) and C)

Question 8

Persons with deposits less than $100,000 in banks, savings and loans, and credit unions run the risk of losing their money in an economic downturn.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  it's not a good time to buy the wood.
B)  it's a good time to buy the wood.
C)  there will be a shortage of the wood.
D)  it will cost less when the exchange rate of U.S. dollars to NZ dollars is just about equal.E) None of the above
F) A) and D)

Question 10

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 11

The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to:

Accepted Answer

A)  small businesses that are unable to obtain loans from other sources.
B)  banks during banking emergencies.
C)  major corporations that are on the verge of bankruptcy.
D)  the federal government when deficits exceed borrowing limits set by Congress.E) A) and C)
F) A) and B)

Question 12

Designed to create more confidence in banking institutions, the FDIC was established:

Accepted Answer

A)  soon after the Civil War.
B)  in 1908, as the result of the banking panic in 1907.
C)  in 1917, as the nation entered World War I.
D)  during the Great Depression of the 1930s.E) A) and D)
F) None of the above

Question 13

Open-market operations is the buying and selling of government securities by the Federal Reserve Board.

Accepted Answer

A) True 
 B)False

Question 14

When the Fed increases the discount rate, banks:

Accepted Answer

A)  must purchase more government securities.
B)  must pay a higher rate when they borrow from the Fed.
C)  will lower the rate they charge to borrowers.
D)  must hold a greater amount of funds in reserve against deposits.E) C) and D)
F) None of the above

Question 15

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Accepted Answer

A)  Internet banks provide their customers a greater sense of security.
B)  Traditional banks charge lower prices for financial services.
C)  Internet banks have lower overhead costs.
D)  Traditional banks offer the electronic transfer of customer funds.E) None of the above
F) All of the above

Question 16

The rate of interest charged by the Federal Reserve is called the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 17

involves the Fed buying and selling U.S. government securities to increase or decrease the money supply.

Accepted Answer

A)  Discounting
B)  Reserve requirements
C)  Deficit funding
D)  Open-market operationsE) All of the above
F) C) and D)

Question 18

Efficient monetary systems eliminate the use of barter.

Accepted Answer

A) True 
 B)False

Question 19

When the Fed buys U.S. government securities, the:

Accepted Answer

A)  size of the federal deficit falls.
B)  discount rate rises.
C)  money supply increases.
D)  banking system loses reserves.E) A) and B)
F) A) and C)

Question 20

While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks.

Accepted Answer

A) True 
 B)False

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

The Federal Reserve requires that ATM machines be located within 100 yards of a commercial bank.

Correct Answer
verified

When the value of the U.S. dollar increases relative to other currencies:

Correct Answer
verified

The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to:

Correct Answer
verified

When the Fed increases the discount rate, banks:

Correct Answer
verified

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Correct Answer
verified

Efficient monetary systems eliminate the use of barter.

Correct Answer
verified

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Correct Answer
verified

The rate of interest charged by the Federal Reserve is called the federal funds rate.

Correct Answer
verified

Correct Answer
verified

insures deposits held in credit unions.

Correct Answer
verified

Designed to create more confidence in banking institutions, the FDIC was established:

Correct Answer
verified

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

Correct Answer
verified

When the Fed buys U.S. government securities, the:

Correct Answer
verified

While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks.

Correct Answer
verified

A comparison of a interest bearing checking account and a savings account reveals that:

Correct Answer
verified

Persons with deposits less than $100,000 in banks, savings and loans, and credit unions run the risk of losing their money in an economic downturn.

Correct Answer
verified

Several European countries report a significant decrease in the level of jobs, income, and production of goods and services. The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.

Correct Answer
verified

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

Correct Answer
verified

involves the Fed buying and selling U.S. government securities to increase or decrease the money supply.

Correct Answer
verified

Open-market operations is the buying and selling of government securities by the Federal Reserve Board.

Correct Answer
verified

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

The Federal Reserve requires that ATM machines be located within 100 yards of a commercial bank.

Correct AnswerverifiedShow Answer

When the value of the U.S. dollar increases relative to other currencies:

Correct AnswerverifiedShow Answer

The Federal Reserve fulfills its role as a "lender of last resort" when it loans funds to:

Correct AnswerverifiedShow Answer

When the Fed increases the discount rate, banks:

Correct AnswerverifiedShow Answer

Which of the following explains why Internet banks often offer their customers better interest rates than traditional banks?

Correct AnswerverifiedShow Answer

Efficient monetary systems eliminate the use of barter.

Correct AnswerverifiedShow Answer

From a bank's point of view, debit cards and credit cards are treated in identical ways.

Correct AnswerverifiedShow Answer

The rate of interest charged by the Federal Reserve is called the federal funds rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

insures deposits held in credit unions.

Correct AnswerverifiedShow Answer

Designed to create more confidence in banking institutions, the FDIC was established:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the Fed buys U.S. government securities, the:

Correct AnswerverifiedShow Answer

While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks, it is more expensive for banks.

Correct AnswerverifiedShow Answer

A comparison of a interest bearing checking account and a savings account reveals that:

Correct AnswerverifiedShow Answer

Persons with deposits less than $100,000 in banks, savings and loans, and credit unions run the risk of losing their money in an economic downturn.

Correct AnswerverifiedShow Answer

Several European countries report a significant decrease in the level of jobs, income, and production of goods and services. The size and strength of the U.S. economy insulates U.S. businesses from the economic problems of other countries.

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

involves the Fed buying and selling U.S. government securities to increase or decrease the money supply.

Correct AnswerverifiedShow Answer

Open-market operations is the buying and selling of government securities by the Federal Reserve Board.

Correct AnswerverifiedShow Answer

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