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

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Question 111

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Barry has $22,000 in a savings account with the Scott Credit Union. While economic conditions have caused financial institutions to struggle, Barry feels that his money is safe due to the fact that the credit union's accounts are protected by the:

A) Federal Deposit Insurance Corporation (FDIC) .
B) Credit Union Insurance Fund (CUIF) .
C) National Alliance of Credit Union Underwriters (NACUU) .
D) National Credit Union Administration (NCUA) .

E) All of the above
F) B) and C)

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Question 112

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Fortunately, the Troubled Assets Relief Program (TARP) took care of the looming bankruptcy problems of major financial services institutions, and taxpayers were not hit with additional bailouts.

A) True
B) False

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Question 113

Multiple Choice

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Which of the following represents one way the Fed increases the amount of money in circulation?

Prior to the Civil War, the United States had two unsuccessful attempts at a central bank.

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) :

The ________ provides the same results as a check because it withdraws funds from a checking account

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.

To decrease the money supply, the Federal Reserve sells U.S. government bonds in open-market operations.

The M-1 money supply includes money in savings accounts, mutual funds, and money market accounts.

Under the Federal Reserve Act of 1913:

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:

The __________ primarily provides for the financing of economic development projects throughout the world

A major cause of the recent banking crisis was the neglect of banks to seriously scrutinize loan applicants for creditworthiness.

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.

A significant increase in the money supply creates inflationary pressures in the economy.

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

Andrea has three types of deposits at her credit union. She has a checking account in her own name worth $32,000, a joint savings account with her husband, which currently holds $95,000, and an IRA account worth $125,449. Her deposits are at risk because they exceed the $250,000 limit on insurance coverage by NCUA.

When the Federal Reserve pursues policies that increase interest rates, the amount of foreign funds flowing into the United States also increases.

A newer product is the payroll debit card. It is cheaper for employers to load your paycheck on a debit card than to cut a check. This is convenient for customers who do not qualify for a regular debit or credit card, because they can use it to pay bills, do online purchasing and even get cash from an ATM machine.

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