Question 1

For banks, check-processing activities

Accepted Answer

A)   still represent the cheapest way to permit customers use of their funds.
B)   are expensive and time consuming.
C)   are not trustworthy and reliable.
D)   are extremely efficient and have deterred customers from using other ways to access their funds.E) None of the above
F) A) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Which of the following institutions monitors the monetary policies of member nations to ensure a global monetary system that works best for all nations?

Accepted Answer

A)   International Monetary Fund
B)   World Bank
C)   International Development Administration
D)   International Reserve BankE) A) and D)
F) None of the above

Question 4

To reduce inflation, the Federal Reserve increases the discount rate.

Accepted Answer

A) True 
 B)False

Question 5

Both the M-1 and M-2 definitions of money include coins and paper money.

Accepted Answer

A) True 
 B)False

Question 6

The U.S. production of the Sacagawea dollar coins provides greater durability than paper dollar bills.

Accepted Answer

A) True 
 B)False

Question 7

By the time of the Civil War, the efficient banking system of the United States was the envy of the rest of the world.

Accepted Answer

A) True 
 B)False

Question 8

Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services.

Accepted Answer

A) True 
 B)False

Question 9

How did banks contribute to the recent financial crisis?

Accepted Answer

A)   They began to offer investment products other than demand and time deposits.
B)   They provided loans higher than the discount rate.
C)   They made risky loans and then created mortgage-backed securities from the assets they held.
D)   They refused to sell anything other than fixed-rate mortgages.E) A) and B)
F) A) and C)

Question 10

A debit card is better than a credit card because it allows the purchaser to float a short-term loan, until the credit card company sends the bills at the end of the month.

Accepted Answer

A) True 
 B)False

Question 11

The Federal Reserve, which was established in 1907 and was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks.

Accepted Answer

A) True 
 B)False

Question 12

According to the Adapting to Change box, a Harvard professor is suggesting we should carry around more large bills, like $50s and $100s, in our wallets.

Accepted Answer

A) True 
 B)False

Question 13

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Accepted Answer

A) True 
 B)False

Question 14

Money is anything people generally accept as payment for goods and services.

Accepted Answer

A) True 
 B)False

Question 15

Historically, savings and loans always paid lower interest rates on time deposits.

Accepted Answer

A) True 
 B)False

Question 16

The problem with bartering is

Accepted Answer

A)   one person in the trade does not feel he/she got a fair shake.
B)   there is a significant amount of corruption in the process, and things get stolen before they are traded.
C)   it is not an easy process, and often cumbersome to carry goods to the place of trade.
D)   it has no place in today's international trading operations.E) C) and D)
F) A) and D)

Question 17

A letter of credit represents a promise that a bank will disburse a specified amount of funds at a particular time if certain conditions are met.

Accepted Answer

A) True 
 B)False

Question 18

One of the most important aspects of the banking legislation passed during the 1930s was that it established

Accepted Answer

A)   the Federal Reserve System.
B)   the gold standard for currency.
C)   the Comptroller of the currency.
D)   federal deposit insurance.E) None of the above
F) B) and D)

Question 19

The purpose of creating the FDIC was to

Accepted Answer

A)   restore confidence in banking institutions.
B)   serve as clearinghouses for transactions involving commercial banks and savings and loans.
C)   provide federally guaranteed insurance to small businesses at low cost.
D)   help the Federal Reserve enforce reserve requirements.E) C) and D)
F) B) and D)

Question 20

________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.

Accepted Answer

A)   Mutual thrift associations
B)   Credit unions
C)   Commercial banks
D)   Mutual fund companiesE) B) and D)
F) A) and B)

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

Which of the following institutions monitors the monetary policies of member nations to ensure a global monetary system that works best for all nations?

Correct AnswerverifiedShow Answer

________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.

Correct AnswerverifiedShow Answer

The problem with bartering is

Correct AnswerverifiedShow Answer

Both the M-1 and M-2 definitions of money include coins and paper money.

Correct AnswerverifiedShow Answer

For banks, check-processing activities

Correct AnswerverifiedShow Answer

The problem with barter exchanges is that it is too difficult to find people to exchange your good with.

Correct AnswerverifiedShow Answer

A letter of credit represents a promise that a bank will disburse a specified amount of funds at a particular time if certain conditions are met.

Correct AnswerverifiedShow Answer

The Federal Reserve, which was established in 1907 and was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks.

Correct AnswerverifiedShow Answer

The purpose of creating the FDIC was to

Correct AnswerverifiedShow Answer

To reduce inflation, the Federal Reserve increases the discount rate.

Correct AnswerverifiedShow Answer

By the time of the Civil War, the efficient banking system of the United States was the envy of the rest of the world.

Correct AnswerverifiedShow Answer

Money is anything people generally accept as payment for goods and services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Nonbanks accept deposits, but do not offer lending services, brokerage services, or insurance services.

Correct AnswerverifiedShow Answer

A debit card is better than a credit card because it allows the purchaser to float a short-term loan, until the credit card company sends the bills at the end of the month.

Correct AnswerverifiedShow Answer

One of the most important aspects of the banking legislation passed during the 1930s was that it established

Correct AnswerverifiedShow Answer

According to the Adapting to Change box, a Harvard professor is suggesting we should carry around more large bills, like $50s and $100s, in our wallets.

Correct AnswerverifiedShow Answer

Historically, savings and loans always paid lower interest rates on time deposits.

Correct AnswerverifiedShow Answer

The U.S. production of the Sacagawea dollar coins provides greater durability than paper dollar bills.

Correct AnswerverifiedShow Answer

How did banks contribute to the recent financial crisis?

Correct AnswerverifiedShow Answer

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