Question 1

In 2009, the Federal Reserve imposed a restrictive rule on the levying of overdraft fees charged by banks and other lending institutions.

Accepted Answer

In 2009, the Federal Reserve Board announced rules that prohibit financial institutions from charging overdraft fees on ATM and one-time debit card transactions unless consumers opt into such coverage.

Question 2

The Financial Institutions Reform, Recovery and Enforcement Act requires public disclosure of a bank's performance rating in meeting the credit needs of its local community.

Accepted Answer

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) includes provisions that require banks to disclose their performance in meeting the credit needs of their local communities, as part of the Community Reinvestment Act (CRA) requirements.

Question 3

By 2000, consumers held more in mutual fund assets than in corporate stocks.

Accepted Answer

By 2000, consumers held more in corporate stocks than in mutual fund assets, as the stock market was booming during the late 1990s.

Question 4

Banks must publicly disclose their performance rating under the Community Reinvestment Act.

Accepted Answer

Banks are required to make their Community Reinvestment Act (CRA) performance evaluations available to the public, which includes their rating, to ensure transparency and accountability in meeting the credit needs of their communities, including low- and moderate-income neighborhoods.

Question 5

The Truth in Savings Act prohibits inaccurate or misleading advertising about deposit accounts.

Accepted Answer

The Truth in Savings Act requires clear and uniform disclosure of the terms and conditions of deposit accounts by financial institutions, specifically prohibiting inaccurate or misleading advertising about these accounts.

Question 6

Depositors must receive credit for local checks they deposit after two business days.

Accepted Answer

The answer of Depositors must receive credit for local checks...

Question 7

Pawn shops and other "fringe banks" primarily serve individuals with stable and lengthy credit histories.

Accepted Answer

Pawn shops and other "fringe banks" typically serve individuals who do not have access to traditional banking services, often due to poor or no credit history.

Question 8

The primary advantage of universal life insurance is that it is available to everyone.

Accepted Answer

The answer of The primary advantage of universal life insurance...

Question 9

U.S. household debt-to-income ratios rose to over 80 percent in the mid-1990s.

Accepted Answer

U.S. household debt-to-income ratios indeed rose to over 80 percent in the mid-1990s, reflecting an increase in borrowing relative to income during that period.

Question 10

The Consumer Protection Act of 1988 prohibits a home equity lender from canceling a loan unless fraud, failure to pay or other violations of the loan contract occur.

Accepted Answer

The Consumer Protection Act of 1988 prohibits a home equity lender from canceling a loan unless fraud, failure to pay or other violations of the loan contract occur.

Question 11

Credit cards have removed the "liquidity constraint" that restricted the spending power of millions of consumers, democratizing access to credit and spending power.

Accepted Answer

Credit cards have indeed removed the liquidity constraint for many consumers by providing them with access to credit. This allows individuals to make purchases even when they do not have immediate funds available, thereby democratizing access to credit and increasing spending power.

Question 12

So-called "Smart Cards" have pre-encoded information such as a pre-authorized credit line to finance the cardholder's purchases.

Accepted Answer

Smart Cards contain embedded microprocessors that can store a wide range of information, including pre-authorized credit lines, which can be used to finance purchases made by the cardholder.

Question 13

U.S. Congress debated a powerful new bankruptcy bill in the late 1990s and as the twenty-first century began. The proposed new law would raise the cost of consumer bankruptcies and demand that households seeking bankruptcy relief from their creditors receive training in the hope of avoiding future financial problems.

Accepted Answer

The U.S. Congress did indeed debate a powerful new bankruptcy bill in the late 1990s and early 2000s, which culminated in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This law made it more difficult and expensive for consumers to file for bankruptcy, and it included provisions that required individuals seeking bankruptcy relief to undergo credit counseling.

Question 14

According to the Financial Services Modernization Act, each consumer has to be offered the possibility to "opt out" of at least some information sharing. However, many consumer groups have recently complained that this law is too weak in protecting consumers' personal data and have demanded new privacy laws at federal and state levels.

Accepted Answer

The Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act, requires financial institutions to provide customers with the option to "opt out" of sharing their personal information with non-affiliated third parties. However, consumer groups argue that the protections are insufficient and advocate for stronger privacy laws.

Question 15

U.S. households borrowed nearly $667 billion in 2009 and by the end of the year owed more than $14 trillion to various lending institutions.

Accepted Answer

The question states that U.S. households borrowed nearly $667 billion in 2009, which means that they increased their debt by that amount. Therefore, the statement is true.

Question 16

Total pension fund reserves ranked low among all household assets, just exceeding $7 trillion by the year 2009.

Accepted Answer

By the year 2009, total pension fund reserves in the United States were actually much higher, exceeding $17 trillion, making them one of the largest categories of household assets, not one of the lowest.

Question 17

Credit extended by a credit card is referred to as revolving credit because the borrower can borrow up to a pre-specified limit, pay back the borrowed money, and borrow again.

Accepted Answer

Revolving credit allows borrowers to repeatedly borrow up to a certain limit and repay over time, making it flexible for continuous borrowing and repayment cycles, as is the case with credit cards.

Question 18

The Credit Card Act of 2009 was developed to promote greater disclosure and transparency in card usage.

Accepted Answer

The Credit Card Act of 2009, also known as the Credit CARD (Card Accountability Responsibility and Disclosure) Act, was designed to protect consumers by enforcing greater transparency and fairness from credit card companies, including clearer disclosure of terms and fees.

Question 19

Consumer saving and borrowing tends to follow the ups and downs of the business cycle, as households tend to use borrowing and saving as devices to smooth out consumer spending over the course of the business cycle.

Accepted Answer

During economic expansions, consumers are more likely to borrow due to increased confidence and income, leading to higher spending. Conversely, in downturns, consumers tend to save more as a precaution against economic uncertainty, attempting to maintain a level of consumption despite fluctuations in income. This behavior reflects an effort to smooth out consumption over the business cycle.

Question 20

Most studies of the bankruptcy phenomena find the principal cause of bankruptcy filings to be the incident of tragic offense in people's lives (e.g., loss of a job, destruction of a home, medical expenses, divorce).

Accepted Answer

Most studies on bankruptcy identify major life disruptions such as job loss, medical expenses, and divorce as the primary causes of bankruptcy filings, highlighting the financial strain these events can cause.

Quiz 21: Flexible Savings Account Options

In 2009, the Federal Reserve imposed a restrictive rule on the levying of overdraft fees charged by banks and other lending institutions.

The Financial Institutions Reform, Recovery and Enforcement Act requires public disclosure of a bank's performance rating in meeting the credit needs of its local community.

By 2000, consumers held more in mutual fund assets than in corporate stocks.

Banks must publicly disclose their performance rating under the Community Reinvestment Act.

The Truth in Savings Act prohibits inaccurate or misleading advertising about deposit accounts.

Depositors must receive credit for local checks they deposit after two business days.

Pawn shops and other "fringe banks" primarily serve individuals with stable and lengthy credit histories.

The primary advantage of universal life insurance is that it is available to everyone.

U.S. household debt-to-income ratios rose to over 80 percent in the mid-1990s.

The Consumer Protection Act of 1988 prohibits a home equity lender from canceling a loan unless fraud, failure to pay or other violations of the loan contract occur.

Credit cards have removed the "liquidity constraint" that restricted the spending power of millions of consumers, democratizing access to credit and spending power.

So-called "Smart Cards" have pre-encoded information such as a pre-authorized credit line to finance the cardholder's purchases.

U.S. households borrowed nearly $667 billion in 2009 and by the end of the year owed more than $14 trillion to various lending institutions.

Total pension fund reserves ranked low among all household assets, just exceeding $7 trillion by the year 2009.

Credit extended by a credit card is referred to as revolving credit because the borrower can borrow up to a pre-specified limit, pay back the borrowed money, and borrow again.

The Credit Card Act of 2009 was developed to promote greater disclosure and transparency in card usage.

Consumer saving and borrowing tends to follow the ups and downs of the business cycle, as households tend to use borrowing and saving as devices to smooth out consumer spending over the course of the business cycle.

Most studies of the bankruptcy phenomena find the principal cause of bankruptcy filings to be the incident of tragic offense in people's lives (e.g., loss of a job, destruction of a home, medical expenses, divorce).