Question 1

Which of the following is not a thrift institution?

Accepted Answer

Commercial banks are not thrift institutions. Thift institutions are financial institutions that primarily take deposits and make loans, with a focus on consumer savings. Examples of thrift institutions include savings and loan associations, mutual savings banks, employee credit unions, and college credit unions. Commercial banks, on the other hand, primarily focus on business and commercial lending, although they do also take deposits from individuals.

Question 2

Federal Reserve notes are

Accepted Answer

Federal Reserve notes are fiat money, meaning their value is not backed by a physical commodity such as gold or silver. Their value is based solely on the trust and confidence people have in the government and economy.

Question 3

The law that established the Federal Reserve System is the

Accepted Answer

The Federal Reserve System was established by the Federal Reserve Act of 1913, which created a central banking system in the United States to address issues with the country's banking system. The National Banking Act of 1863 and the Banking Act of 1933 both had significant impacts on the banking system, but neither established the Federal Reserve System. The laws that established the FDIC and the Comptroller of the Currency were also separate from the Federal Reserve Act.

Question 4

Some financial institutions are known as financial intermediaries because they serve as go-betweens that link

Accepted Answer

Financial intermediaries act as middlemen between savers and borrowers by collecting funds from savers and lending them to borrowers. This includes institutions such as banks, credit unions, and investment companies.

Question 5

The duties of the Federal Reserve include all of the following except one.Which is the exception?

Accepted Answer

The answer of The duties of the Federal Reserve include...

Question 6

The Federal Reserve System was established

Accepted Answer

The Federal Reserve System was established in 1914 with the enactment of the Federal Reserve Act.

Question 7

The members of the Board of Governors of the Fed are

Accepted Answer

The members of the Board of Governors of the Fed are selected by the President with the approval of the Senate. This is stated in the Federal Reserve Act. They are appointed for 14-year terms and their terms are staggered so that only one appointment expires every two years.

Question 8

The distinction between depository institutions and other financial institutions is that

Accepted Answer

The best choice is E because depository institutions are unique in that they receive funds through customer deposits, which they then use to make loans and other investments. Other financial institutions, such as investment banks and insurance companies, may also make loans and invest funds, but they do not necessarily rely on customer deposits as a source of funding. Options A, B, C, and D are all incorrect statements that do not accurately distinguish depository institutions from other financial institutions.

Question 9

When the Federal Reserve System was established,

Accepted Answer

Originally, only federally chartered banks were required to join the Federal Reserve System. State-chartered banks were allowed to join voluntarily. It wasn't until the Banking Act of 1935 that all banks were required to become members.

Question 10

The reason that the Federal Reserve System has not been more effective is that it lacks the power to set legal reserve requirements for member banks.

Accepted Answer

This statement is false. The Federal Reserve System does have the power to set legal reserve requirements for member banks. In fact, it regularly exercises this power as a tool for implementing monetary policy.

Question 11

Under the Federal Reserve System,

Accepted Answer

The correct answer is E as there are 12 Federal Reserve banks located throughout the United States including in major cities such as New York, Chicago, and San Francisco. Each Federal Reserve bank serves a specific region and together they make up the Federal Reserve System.

Question 12

All of the following are depository institutions except one.Which is the exception?

Accepted Answer

Stock brokers are not considered depository institutions as they do not accept deposits from customers. They provide investment services such as buying and selling stocks, bonds, and other securities, but do not hold or maintain customer deposits like commercial banks, savings and loan associations, mutual savings banks, and credit unions.

Question 13

Which of the following is a depository institution?

Accepted Answer

A depository institution is a type of financial institution that primarily accepts deposits from individuals and businesses. Therefore, out of the given options, a credit union is the only one that operates as a depository institution by accepting deposits and providing other financial services to its members. Insurance companies, finance companies, and pension funds deal with insurance policies, loans, and retirement funds respectively, while a stock market is an exchange where securities are bought and sold.

Question 14

Federal Reserve banks do all of the following except one.Which is the exception?

Accepted Answer

The answer of Federal Reserve banks do all of the...

Question 15

The Federal Reserve System was created

Accepted Answer

The answer of The Federal Reserve System was created
...

Question 16

The twelve district banks of the Federal Reserve System were created to decentralize power and respond to the public's fears of the monopoly power of a single central bank such as the Bank of England or the Bank of Japan.

Accepted Answer

The statement is true. The creation of twelve district banks was part of the Federal Reserve Act of 1913, which aimed to create a more decentralized banking system in the United States and prevent the concentration of power in a single central bank.

Question 17

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

Making loans to the public is not a function of the Federal Reserve System. The other options - holding deposits of member banks, clearing checks, making loans to member banks, and serving as a bank to the Federal government - are all functions of the Federal Reserve System.

Question 18

In the United States,only Federal Reserve Banks can issue paper currency but their power to do so is virtually unlimited.

Accepted Answer

The Federal Reserve Banks have the exclusive authority to issue paper currency in the United States, and their power to do so is virtually unlimited as they can print as much money as they deem necessary to maintain economic stability.

Question 19

Which of the following is not a depository institution?

Accepted Answer

Pension funds are not depository institutions. They are retirement plans that invest funds on behalf of employees to provide them with an income in retirement. Depository institutions are financial institutions that obtain funds mainly by accepting deposits from the public. Examples include commercial banks, savings and loan associations, credit unions, and thrift institutions.

Question 20

Some financial institutions are classified as depository institutions based on

Accepted Answer

Depository institutions are financial institutions that obtain funds primarily by accepting deposits from the public. Therefore, the way they acquire funds is the key criterion for classification as a depository institution. The other criteria listed may be factors that contribute to their overall operations, but they are not the defining characteristics of a depository institution.

Quiz 14: Money and the Financial System