Question 1

Which of the following is not a favorable characteristic of money?

Accepted Answer

A)  Barterability
B)  Divisibility
C)  Portability
D)  DurabilityE) A) and D)
F) C) and D)

Question 2

The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 3

The reserve requirement represents the interest rate charged by the Federal Reserve for government guaranteed student loans.

Accepted Answer

A) True 
 B)False

Question 4

The Federal Reserve represents a "banker's bank" because:

Accepted Answer

A)  it was created as a central clearinghouse for the transactions of the largest banks.
B)  commercial banks compete with the FED for business customers.
C)  it lobbies Congress in support of banking reform legislation.
D)   it holds the deposits of commercial banks and makes loans to banks that need additional funds.E) B) and C)
F) C) and D)

Question 5

The Federal Reserve that was established in 1907 was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks.

Accepted Answer

A) True 
 B)False

Question 6

Many S&Ls failed when capital gains taxes increased in the late 70s and early 80s, making it less attractive to invest in real estate and causing investors to walk away from their property loans.

Accepted Answer

A) True 
 B)False

Question 7

The International Monetary Fund assists with the smooth flow of money among nations.

Accepted Answer

A) True 
 B)False

Question 8

To stimulate the economy during a recession, the Fed would:

Accepted Answer

A)  cut taxes.
B)  increase the discount rate.
C)  reduce the reserve requirement.
D)  sell government securities.E) C) and D)
F) B) and C)

Question 9

The FDIC insures individual accounts in member institutions up to a maximum of , and temporarily, it increased the maximum level to , through December 31, 2009.

Accepted Answer

A)  $10,000; $100,000.
B)  $40,000; $100,000.
C)  $100,000; $250,000.
D)  $1,000,000; $2,500,000.E) All of the above
F) A) and B)

Question 10

The federal funds rate is the interest rate that banks charge each other.

Accepted Answer

A) True 
 B)False

Question 11

Inflation occurs in an economy with too little money chasing too many goods.

Accepted Answer

A) True 
 B)False

Question 12

Critics of the World Bank charge the organization with:

Accepted Answer

A)  financially supporting the military of oppressive leaders.
B)  financing projects that damage the ecosystem.
C)  lending most of its money to poor nations.D) B) and C)
E) A) and C)

Question 13

When the Fed sells U.S. government securities, the U.S. money supply increases.

Accepted Answer

A) True 
 B)False

Question 14

The Fed requires that banks hold a percentage of their deposits in a vault. This percentage is the .

Accepted Answer

A)  prime rate
B)  working capital requirement
C)  discount rate
D)  reserve requirementE) C) and D)
F) A) and B)

Question 15

The Federal Reserve System was designed to prevent a repeat of the 1907 banking crisis.

Accepted Answer

A) True 
 B)False

Question 16

The Fed Chairman is in control of:

Accepted Answer

A)  the world's money supply.
B)  the U.S. money supply.
C)  fiscal policy.
D)  the IMF.E) A) and C)
F) All of the above

Question 17

Which of the following can include an embedded radio-frequency antenna that allows the holder to access secure areas in buildings or buy gas with the swipe of a card?

Accepted Answer

A)  smart cards
B)  direct deposit cards
C)  e-cards
D)  check conversion cardsE) All of the above
F) B) and C)

Question 18

Rather than receiving a paycheck, Marissa authorizes his employer to deposit his pay directly into his account at the Mortonville Bank. Her bank also provides her with a card she uses to shop. The retailer uses the card to transfer money from Marissa's account to the store's account.

Accepted Answer

A)  credit
B)  traveler's
C)  debit
D)  automatic transfer cardE) C) and D)
F) B) and C)

Question 19

The electronic transfer of money increases the Federal Reserve's check-clearing operations.

Accepted Answer

A) True 
 B)False

Question 20

The government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.

Accepted Answer

A) True 
 B)False

Exam 20: Money, Financial Institutions, and the Federal Reserve

The International Monetary Fund assists with the smooth flow of money among nations.

Correct AnswerverifiedShow Answer

The government is concerned about inflationary pressures that seem to be building within the nation. Restricting the growth of money supply provides an effective strategy to reduce these inflationary pressures.

Correct AnswerverifiedShow Answer

The Federal Reserve System enabled the U.S. economy to avoid serious banking problems during the Great Depression.

Correct AnswerverifiedShow Answer

Many S&Ls failed when capital gains taxes increased in the late 70s and early 80s, making it less attractive to invest in real estate and causing investors to walk away from their property loans.

Correct AnswerverifiedShow Answer

The Fed Chairman is in control of:

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate that banks charge each other.

Correct AnswerverifiedShow Answer

The reserve requirement represents the interest rate charged by the Federal Reserve for government guaranteed student loans.

Correct AnswerverifiedShow Answer

Which of the following is not a favorable characteristic of money?

Correct AnswerverifiedShow Answer

Rather than receiving a paycheck, Marissa authorizes his employer to deposit his pay directly into his account at the Mortonville Bank. Her bank also provides her with a card she uses to shop. The retailer uses the card to transfer money from Marissa's account to the store's account.

Correct AnswerverifiedShow Answer

The Federal Reserve System was designed to prevent a repeat of the 1907 banking crisis.

Correct AnswerverifiedShow Answer

Critics of the World Bank charge the organization with:

Correct AnswerverifiedShow Answer

The Fed requires that banks hold a percentage of their deposits in a vault. This percentage is the .

Correct AnswerverifiedShow Answer

The Federal Reserve that was established in 1907 was to be a "lender of last resort," loans money to small businesses that are unable to obtain loans through private banks.

Correct AnswerverifiedShow Answer

When the Fed sells U.S. government securities, the U.S. money supply increases.

Correct AnswerverifiedShow Answer

Inflation occurs in an economy with too little money chasing too many goods.

Correct AnswerverifiedShow Answer

To stimulate the economy during a recession, the Fed would:

Correct AnswerverifiedShow Answer

The FDIC insures individual accounts in member institutions up to a maximum of , and temporarily, it increased the maximum level to , through December 31, 2009.

Correct AnswerverifiedShow Answer

Which of the following can include an embedded radio-frequency antenna that allows the holder to access secure areas in buildings or buy gas with the swipe of a card?

Correct AnswerverifiedShow Answer

The Federal Reserve represents a "banker's bank" because:

Correct AnswerverifiedShow Answer

The electronic transfer of money increases the Federal Reserve's check-clearing operations.

Correct AnswerverifiedShow Answer

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