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

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Question 51

True/False

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A more recent product of banks is checking accounts that pay interest to depositors.

A) True
B) False

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Question 52

Multiple Choice

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Today,a regular _____________ is a system where you can exchange goods for other goods.You submit your goods and you receive trade credit that you can use to buy other goods.

A) world market
B) barter exchange
C) world trade center
D) trading post

E) A) and B)
F) None of the above

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Question 53

Multiple Choice

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First Data Corporation has developed the GO-Tag,where:

Tim travels extensively on business.Most of the hotels where he stays provide him with a card that unlocks his room.The card is keyed to the particular lock that matches the lock on the assigned room,and also contains information about Tim.The type of card that Tim is using is a smart card.

Due to federal regulations limiting their investment opportunities,pension funds play a minor role in U.S.financial markets.

H & Q Importers arranged to have a French winery ship a large quantity of fine wine to the United States.By signing a ______________ H & Q authorized its bank to make full payment to the French winery if and when the wine arrives at the H & Q warehouse in Boston.

The Fed uses ________ to regulate the money supply.

Which of the following statements best summarizes the difference between M-1 and M-2?

After the bank failures of the Great Depression,the U.S.government formed three organizations: the FDIC (Federal Deposit Insurance Corporation);the SAIF (Savings Association Insurance Fund);and,NCUA (National Credit Union Administration)to restore people's confidence and insure deposits.

Banks focus on the creditworthiness of the borrower when determining whether to grant a loan.

According to the Spotlight on Small Business box in Chapter 20,as a result of the recent recession,banks have become much more lenient in their lending policies.

The purpose of creating the FDIC was to:

Commercial banks primarily serve two types of customers:

Commercial banks offer creditworthy customers automatic loans to cover checks written in excess of their checking account balance.

Which of the following is included in the M-2 definition of the money supply but not the M-1 definition?

The community college where Jake works requires all employees to contribute to a pension fund.At this time,he is not too worried about the safety of this contribution because:

The Savings Association Insurance Fund insures the holders of accounts in savings and loan associations.

The U.S.government has done its best to create dollar bills that are easily duplicated.

Pension funds are monies put aside by corporations,non-profit organizations,or unions to fund the financial needs of their employees,upon retirement.

Mini-Case The Bank of Bramblewood survived the Great Depression through the dedication,hard work,and conservative practices of its first president,Red E.Kash.Indeed,Red's personal drive and business skills helped the Bank of Bramblewood thrive during his 50-year tenure as president.After his retirement his granddaughter,Patty,took a position with the bank.Patty inherited her grandfather's business skills and by 1994 she had risen to become the second member of the Kash family to head the bank. Patty admits she owes a great deal to her grandfather's leadership and advice,but she also quickly points out that the banking industry has changed significantly since Red retired.Patty graduated from college with a degree in finance,and also holds several certifications with the American Institute of Banking."What Granddad achieved during his era was truly remarkable," Patty points out."But times have changed,and banking regulations and bank competitors have certainly changed.If we hope to prosper in this century we have to adjust to new competition,learn to work with new technologies,and take advantage of new opportunities.The Bank of Bramblewood has always operated for the benefit of our customers and we will continue to do so.But we must serve them more efficiently and creatively than in the past." -The Bank of Bramblewood would like to increase its loans to customers,but it is currently mandated by a high reserve rate.As a Federal Reserve member bank,it will borrow additional funds from the Fed and charge its customers an interest rate that is higher than the _______________.