Question 1

Usury can best be described as&#10;A) Interest rates set by the federal government&#10;B) Rates charged by unscrupulous lenders&#10;C) Interest paid or received that exceeds state laws&#10;D) Interest limitations based on religious beliefs

Accepted Answer

Usury refers to excessively high interest rates charged by lenders, often predatory in nature. These lenders take advantage of borrowers who may be desperate for funds and charge exorbitant rates, which can trap them in a cycle of debt. While some states have laws capping interest rates, usury can still occur if lenders find ways to evade these laws, such as charging fees in addition to interest.

Question 2

The major source of money funding residential mortgage loans today is&#10;A) Money market funds&#10;B) Commercial bank time deposits&#10;C) The federal government&#10;D) The sale of mortgage backed securities

Accepted Answer

Money market funds

Question 3

The purpose of cash reserves as required by the FED are best described as&#10;A) Cash placed on deposit with the FED at no interest as a cushion to meet emergency requirements of member banks&#10;B) Cash held off the market to controlled interest rates&#10;C) A source of income for the fed&#10;D) A better control over a bank's lending policies

Accepted Answer

Cash reserves as required by the FED are primarily meant to act as a cushion to meet emergency requirements of member banks. This cash is held on deposit with the FED and earns no interest. These reserves help ensure the stability of the banking system and prevent bank runs.

Question 4

Of the following, which can be the best indicator of mortgage interest rates?&#10;A) The discount rate of interest&#10;B) Fannie Mae/Freddie Mac administered yield requirements&#10;C) The results of weekly Treasury bill offerings&#10;D) Reports made by the Farm Credit System

Accepted Answer

The results of weekly Treasury bill offerings are closely watched as they reflect the government's borrowing costs and can influence mortgage interest rates, as they are often used as a benchmark for other interest rates.

Question 5

Which of the following is most likely to result from a substantial increase in the money supply?&#10;A) A lowering of inflation&#10;B) A reduction of interest rates&#10;C) An increase in interest rates&#10;D) An increase in the value of a dollar

Accepted Answer

An increase in the money supply generally leads to a reduction in interest rates as banks have more money to lend out and competition for borrowers increases. This leads to increased demand for loans, which in turn leads to increased economic activity and potentially increased inflation. Therefore, A, C, and D are unlikely outcomes of a substantial increase in the money supply.

Question 6

When the Federal Reserve buys or sells government securities in the financial markets, it is called&#10;A) Juggling the credit markets&#10;B) Cycling the discount rate&#10;C) Discounting the market rates&#10;D) Open market operations

Accepted Answer

When the Federal Reserve buys or sells government securities in the financial markets, it is referred to as open market operations. The intention behind this is to manipulate the money supply and influence short-term interest rates.

Question 7

Fiscal policies of the government can best be described as&#10;A) Budgetary control measures&#10;B) Management of the U.S. Treasury&#10;C) Government taxing and spending policies&#10;D) Policies that control the banking system

Accepted Answer

Fiscal policies of the government refer to the government's taxing and spending policies. These policies aim to influence the economy by adjusting the amount of money in circulation, promoting economic growth, and stabilizing prices. Fiscal policies may include government spending on infrastructure projects, social programs, and healthcare, as well as taxation policies on individuals and businesses. The government uses these policies to achieve its economic goals, such as reducing unemployment, increasing economic growth, and maintaining stable prices.

Question 8

Categories of demand for money are all of the following EXCEPT&#10;A) Government requirements&#10;B) Consumer loans&#10;C) Mortgage loans&#10;D) Deposits in saving associations

Accepted Answer

The answer of Categories of demand for money are all...

Question 9

Monetary policies in this country are under the control of the&#10;A) Office of Thrift Supervision&#10;B) Secretary of the Treasury&#10;C) Federal Reserve Bank Board&#10;D) Federal Deposit Insurance Corporation

Accepted Answer

Monetary policies in the United States are under the control of the Federal Reserve Bank Board, also known as the Federal Reserve or the "Fed." The Fed is responsible for setting and implementing policies related to the nation's money supply, interest rates, and the regulation of banks and other financial institutions. The other choices listed are not directly responsible for monetary policies in the US.

Question 10

One of the tools used by the Federal Reserve to influence the economy is&#10;A) Changing the discount rate of interest&#10;B) Limiting a bank's authority to accept deposits&#10;C) Changing the prime rate of interest&#10;D) Encouraging competition with non-bank banks

Accepted Answer

Changing the discount rate of interest is a common tool used by the Federal Reserve to influence the economy. This is the rate at which banks can borrow money from the Federal Reserve, and raising or lowering it can impact borrowing and lending activity in the economy.

Question 11

The agency responsible for raising the money and paying federal government obligations is the&#10;A) Office of Management and Budget&#10;B) U.S. Treasury&#10;C) Federal Reserve Bank&#10;D) Comptroller of Currency

Accepted Answer

The answer of The agency responsible for raising the money...

Deck 2: Money and Interest Rates