When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as
A) check kiting.
B) check clearing.
C) check floating.
D) check balancing.

Question

Quizplus · Accepted Answer

Check clearing refers to the process of exchanging checks between banks and ensuring that the appropriate funds have been transferred. The Federal Reserve oversees this process to ensure that it is done accurately and securely. Check kiting refers to the illegal practice of writing a check from one bank account while simultaneously withdrawing or depositing funds from another bank account, in order to artificially inflate the balance of the first account. Check floating refers to the practice of intentionally writing a check when there are insufficient funds in the account, with the hope that the necessary funds will be deposited before the check is presented for payment. Check balancing refers to the process of reconciling a bank statement with your own records to ensure that all transactions have been recorded accurately.

When Checks Are Exchanged Between Banks, the Fed Oversees the Banks