Deck 15: Money and Banking

Question 1

The prime rate is the interest rate available to a bank's most creditworthy customers.

Answer 1

True

Question 2

As the government's bank,the Fed produces the nation's paper currency and lends money to the government.

Answer 2

True

Question 3

In mutual savings banks,all depositors are considered owners of the bank.

Answer 3

True

Question 4

Money functions as a medium of exchange.

Question 5

The discount rate is the interest rate that the Fed charges when it loans money to a commercial bank.

Question 6

The World Bank is a United Nations agency that provides a limited scope of financial services such as funding national improvements in underdeveloped countries.

Question 7

The M-2 money supply includes everything that is in the M-1 money supply.

Question 8

Any object can serve as money if it is portable,divisible,durable,and stable.

Question 9

Time deposits are bank funds that are intended to be held to maturity and cannot be transferred by check.

Question 10

The M-1 money supply includes the most liquid forms of money.

Question 11

Through the FDIC,a deposit in a member bank is currently insured up to $50,000.

Question 12

During 2009,the Fed decreased its investments in commercial banks.

Question 13

The FDIC clears checks for commercial banks to ensure that cash is deducted from the check writer's account and deposited in the check receiver's account.

Question 14

Insurance companies are nondeposit financial institutions.

Question 15

A letter of credit is a bank promise to pay a designated firm a specified amount at a future date.

Question 16

As pointed out in the text,one of the three functions of money is its traditional use for wagering.

Question 17

A certificate of deposit (CD)is a demand deposit.

Question 18

A savings account is part of the M-1 money supply.

Question 19

One of the functions of money is eliminating inflation.

Question 20

The Federal Reserve decides how many bills to produce and how many to destroy,illustrating the divisibility characteristic of money.

Question 21

A slogan for a credit union might be: "Everyone is welcome to join our credit union."

Question 22

Savings and loan associations began primarily to loan money to small to medium-sized businesses.

Question 23

Electronic funds transfer systems are used for automatic payroll deposit and bill payment.

Question 24

Individual retirement accounts can be opened only by self-employed people such as doctors,small business owners,and consultants.

Question 25

Demand deposits and time deposits are the same.

Question 26

A decrease in the reserve requirement will result in a reduction in the money supply.

Question 27

The Federal Reserve System serves as "the bankers' bank."

Question 28

Reserve requirements,interest rate controls,and open-market operations are the tools used by the Fed to control the money supply.

Question 29

The Federal Reserve System is responsible for the conduct of U.S.fiscal policy.

Question 30

Banks are subject to prosecution when they fail to maintain systems for identifying and reporting suspicious activities.

Question 31

The USA Patriot Act,passed in 2001,is designed to reduce bank risks.

Question 32

Banks create money by minting bills and coins.

Question 33

When the Fed buys securities through open-market operations,the money supply is reduced.

Question 34

The Customer Identification Program (CIP)was implemented as a requirement of the USA Patriot Act.

Question 35

A money market mutual fund is composed of long-term bonds and stocks.

Question 36

All nationally chartered banks are members of the Federal Reserve System,as are some state-chartered banks.

Question 37

CDs are an example of a time deposit.

Question 38

It is rare for a bank to offer its customers currency exchange.

Question 39

Commercial banks are also referred to as thrift institutions.

Question 40

The Federal Reserve consists of seven banking districts.

Question 41

According to the text,which of the following is a characteristic of money?

A) spendable
B) portable
C) artistically respectable
D) loanable

Question 42

The international payments process that moves money between buyers and sellers on different continents is subject to worldwide policy systems.

Question 43

A banker's acceptance requires payment by a specified date.

Question 44

A ________ is intended to be held to maturity.

A) currency
B) time deposit
C) demand deposit
D) certificate of deposit

Question 45

Discount rate decreases can speed up a sagging U.S.economy.

Question 46

The value of money depends on its ________.

A) supply
B) divisibility
C) currency unit
D) all of these

Question 47

________ are short-term,low-risk financial securities purchased with the pooled assets of investor-owners.

A) Demand deposits
B) Time deposits
C) ATM accounts
D) Money market mutual funds

Question 48

M-2 is often used for economic planning by business and government agencies.

Question 49

The International Monetary Fund is a large international bank under the control of the Red Cross.

Question 50

In international payments,equal money inflows and outflows can result in no money being transferred between countries.

Question 51

The Federal Reserve System is the only federal agency that regulates banks.

Question 52

"Blink" technology refers to how fast a magnetic strip on a credit card works.

Question 53

The International Monetary Fund seeks to promote stable exchange rates.

Question 54

Commercial banks do not pay for FDIC membership.

Question 55

According to the text,which of the following is NOT a characteristic of money?

A) spendable
B) portable
C) divisible
D) durable

Question 56

According to the U.S.Treasury,issuing a check payment is still less expensive than issuing an EFT payment.

Question 57

An example of blink technology is when you go to the grocery store and instead of writing a check or swiping your debit card or using a credit card,you "flash" or wave a card in front of the cashier.

Question 58

A(n)________ is a financial institution accepting deposits and making loans primarily for home mortgages.

A) investment club
B) credit union
C) commercial bank
D) savings and loan association

Question 59

An example of a point-of-sale (POS)terminal is when you go to the grocery store and the system transfers funds from your account to the store's account.

Question 60

Which of the following has a fixed term?

A) demand deposits
B) time deposits
C) money market mutual funds
D) savings accounts

Question 61

A(n)________ is an electronic machine that allows customers to conduct accounting related activities 24 hours a day,seven days a week.

A) IRA
B) ATM
C) ETF
D) FDIC

Question 62

________ allow financial information to be transmitted via electrical impulses over wire,cable,or microwave.

A) Trust services
B) Demand deposits
C) Electronic funds transfer systems
D) Investment banks

Question 63

The ________ is the percentage of its deposits a bank must hold,in cash or on deposit,with a Federal Reserve bank.

A) discount rate
B) reserve requirement
C) open-market rate
D) prime rate

Question 64

The management of the nation's economic growth by managing money supply and interest rates is called ________.

A) fiscal policy
B) monetary policy
C) supply/demand policy
D) growth policy

Question 65

The ________ rate is the interest rate at which commercial banks lend reserves to each other,usually overnight.

A) discount
B) open-market
C) federal funds
D) selective

Question 66

A nondeposit financial institution that pools funds from its members to provide retirement income for its members is a(n)________.

A) credit union
B) securities investment dealer
C) pension fund
D) insurance company

Question 67

A commercial loan set at prime + 1 means that ________.

A) the interest rate is the prime rate
B) the interest rate is flexible
C) the interest rate will be determined in one month
D) the interest rate is 1% over the prime rate

Question 68

A nondeposit financial institution that invests funds collected as premiums to provide coverage against losses is a(n)________.

A) credit union
B) securities investment dealer
C) insurance company
D) finance company

Question 69

About how many ATMs are located in U.S.bank buildings and other locations?

A) 20,000
B) 120,000
C) 360,000
D) 550,000

Question 70

The ________ rate is the interest rate at which member banks can borrow money from the Federal Reserve.

A) lending
B) selective
C) open-market
D) discount

Question 71

The nation's central bank is ________.

A) Citicorp
B) Barclay's Bank
C) Chase Manhattan
D) The Federal Reserve

Question 72

A ________ is a promise by a bank to pay a foreign firm a certain amount of money if specific conditions are met.

A) currency exchange
B) letter of credit
C) financial advisement
D) banker's acceptance

Question 73

At ________,all depositors are considered to be owners of the institution.

A) commercial banks
B) savings and loan associations
C) mutual savings banks
D) downtown major banks

Question 74

At ________,deposits are only accepted from members who meet specific qualifications,usually working for a specific employer.

A) mutual savings banks
B) savings and loan associations
C) commercial banks
D) credit unions

Question 75

A ________ is a nondeposit financial institution that buys and sells stocks and bonds both for investors and for its own accounts.

A) credit union
B) securities investment dealer
C) finance company
D) pension fund

Question 76

A ________ is a nondeposit financial institution that specializes in making loans to businesses and consumers.

A) credit union
B) securities investment dealer
C) finance company
D) pension fund

Question 77

A(n)________ is a tax-deferred pension fund with which wage earners supplement other retirement funds.

A) letter of credit
B) individual retirement account
C) banker's acceptance
D) mutual fund

Question 78

Which of the following is the least expensive?

A) to issue a check payment
B) to borrow from a bank
C) to issue an electronic funds transfer (ETF) payment
D) to obtain a cash advance on a credit card

Question 79

The federal agency that guarantees the safety of bank deposits is the ________.

A) IRA
B) ATM
C) ETF
D) FDIC

Question 80

A ________ is a promise by a bank to pay a designated firm a specific amount at a future date.

A) currency exchange
B) letter of credit
C) financial advisement
D) banker's acceptance