Question 1

The Federal Reserve represents a "bankers' bank" because

Accepted Answer

A)  it was created as a central clearinghouse for the transactions of the largest banks. 
B)  commercial banks compete with the Fed for business customers. 
C)  it lobbies Congress in support of banking reform legislation. 
D)  it holds the deposits of commercial banks and makes loans to banks that need additional funds. 
A)  it was created as a central clearinghouse for the transactions of the largest banks. 
B)  commercial banks compete with the Fed for business customers. 
C)  it lobbies Congress in support of banking reform legislation. 
D)  it holds the deposits of commercial banks and makes loans to banks that need additional funds. D

Question 2

Electronic money is a newer form of money.

Accepted Answer

A) True 
 B)False  True

Question 3

As the bank has grown and expanded to other towns in its region, several of its business customers are participating in global trade. Which of the following services provided by the bank would help companies conduct international business?

Accepted Answer

A)  letters of credit 
B)  banker's transactions 
C)  certificates of deposit 
D)  trade exchange letters 
A)  letters of credit 
B)  banker's transactions 
C)  certificates of deposit 
D)  trade exchange letters A

Question 4

The reserve requirement represents the interest rate charged by the Federal Reserve for government-guaranteed student loans.

Accepted Answer

A) True 
 B)False

Question 5

The ________ insures holders of accounts in savings and loan associations.

Accepted Answer

A)  Savings Association Insurance Fund 
B)  Federal Savings Protection Agency 
C)  Savings and Loan Assurance Corporation 
D)  National Savings Deposit Insurance Cooperative 
A)  Savings Association Insurance Fund 
B)  Federal Savings Protection Agency 
C)  Savings and Loan Assurance Corporation 
D)  National Savings Deposit Insurance Cooperative

Question 6

During Red's time as head of the Bank of Bramblewood, the bank offered three services: time deposits, demand deposits, and home and business loans. Under Patty's leadership, the bank offers those same services, a variety of investment opportunities such as mutual funds and bonds, and ________ through the Internet, which supports a number of services such as paying bills directly from customers' accounts, direct deposit, and transferring money.

Accepted Answer

A)  demand deposits 
B)  online banking 
C)  passbook banking 
D)  composite banking 
A)  demand deposits 
B)  online banking 
C)  passbook banking 
D)  composite banking

Question 7

When a commercial bank fails, depositors lose all of their money.

Accepted Answer

A) True 
 B)False

Question 8

The Fed announces that it intends to implement policies to increase interest rates. Which of the following correctly identifies the most likely result of higher U.S. interest rates?

Accepted Answer

A)  More money will flow into the United States from foreign investors. 
B)  The economy will experience an increase in business investment spending. 
C)  The value of the dollar will fall relative to other currencies. 
D)  The rate of inflation will increase. 
A)  More money will flow into the United States from foreign investors. 
B)  The economy will experience an increase in business investment spending. 
C)  The value of the dollar will fall relative to other currencies. 
D)  The rate of inflation will increase.

Question 9

The currencies of some countries, although durable and portable, are relatively unstable, which makes international exchanges difficult.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Theoretically, with the proper monetary policy, the U.S. economy can continue to grow without causing inflation.

Accepted Answer

A) True 
 B)False

Question 12

Thanks in part to the Federal Reserve System, few banks failed during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 13

Identify and discuss the tools and products that electronically transfer funds.

Accepted Answer

In an electronic funds transfer (EFT) sy

Question 14

The strength of the U.S. dollar depends on the strength of the U.S. economy relative to the economies of other nations.

Accepted Answer

A) True 
 B)False

Question 15

The Fed has just reduced the reserve requirement from 14% to 12%. Bigbux Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $78 million in reserves.

Accepted Answer

A) True 
 B)False

Question 16

Certificates of deposit (CDs) represent demand deposits issued by banks.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  Online banks provide their customers a greater sense of security. 
B)  Traditional banks charge lower prices for financial services. 
C)  Online banks have lower overhead costs. 
D)  Traditional banks offer the electronic transfer of customer funds. 
A)  Online banks provide their customers a greater sense of security. 
B)  Traditional banks charge lower prices for financial services. 
C)  Online banks have lower overhead costs. 
D)  Traditional banks offer the electronic transfer of customer funds.

Question 18

Because they charge higher interest rates, commercial and consumer finance companies often fail to attract borrowers.

Accepted Answer

A) True 
 B)False

Question 19

The Federal Reserve System consists of ________ Federal Reserve banks.

Accepted Answer

A)  5 
B)  9 
C)  12 
D)  14 
A)  5 
B)  9 
C)  12 
D)  14

Question 20

International bankers make loans wherever they can get the maximum return for their money.

Accepted Answer

A) True 
 B)False

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

The Federal Reserve represents a "bankers' bank" because

Electronic money is a newer form of money.

As the bank has grown and expanded to other towns in its region, several of its business customers are participating in global trade. Which of the following services provided by the bank would help companies conduct international business?

The reserve requirement represents the interest rate charged by the Federal Reserve for government-guaranteed student loans.

The ________ insures holders of accounts in savings and loan associations.

When a commercial bank fails, depositors lose all of their money.

The Fed announces that it intends to implement policies to increase interest rates. Which of the following correctly identifies the most likely result of higher U.S. interest rates?

The currencies of some countries, although durable and portable, are relatively unstable, which makes international exchanges difficult.

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

Theoretically, with the proper monetary policy, the U.S. economy can continue to grow without causing inflation.

Thanks in part to the Federal Reserve System, few banks failed during the Great Depression.

Identify and discuss the tools and products that electronically transfer funds.

The strength of the U.S. dollar depends on the strength of the U.S. economy relative to the economies of other nations.

The Fed has just reduced the reserve requirement from 14% to 12%. Bigbux Bank holds $650 million in deposits. It will need to become more conservative with its lending procedures because it now must hold $78 million in reserves.

Certificates of deposit (CDs) represent demand deposits issued by banks.

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

Because they charge higher interest rates, commercial and consumer finance companies often fail to attract borrowers.

The Federal Reserve System consists of ________ Federal Reserve banks.

International bankers make loans wherever they can get the maximum return for their money.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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