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

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Question 111

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Although there are many features about online banking that customers do not care for, they are seldom concerned with security due to continued assurances by the banking industry.

A) True
B) False

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Question 112

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An increase in the discount rate produces a decrease in money supply.

A) True
B) False

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Question 113

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The Federal Reserve System was designed to prevent a repeat of the 1907 banking crisis.

Payroll debit cards are cheaper for employers because your paycheck is loaded on a debit card instead of cutting 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.

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

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

When a customer purchases an item with a debit card,

A time deposit that earns interest is a

Thomas Jefferson proposed the establishment of the first central bank in the United States.

Rico need not worry that his $8,347 in a checking account at Bigbux Bank could be lost if the bank fails, because Bigbux is a Federal Deposit Insurance Corporation (FDIC) member bank.

The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression.

International Industries wants to import heavy machinery from a producer located in the Croatia. To facilitate payment to the Croatian firm, International Industries arranged for its bank to issue a banker's acceptance. Under this arrangement, the bank pays the exporter after the equipment passes inspection.

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

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

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.

When Alex in Quince Orchard, MD, uses a check to buy a tractor from Steven in Austin, TX, ________ different banks are involved in the transaction.

In the 1930s, during the Great Depression, the government started an insurance program to protect the public from bank failures.

The interest paid on time deposits, today, represents the main difference between time and demand deposits.

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

The ________ insures deposits held in credit unions.