chapter 15 BUSI – Flashcards
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34) Which of the following has a fixed term?
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B) time deposits
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35) Which of the following financial institutions is considered a thrift institution?
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B) credit union
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36) The Norton County Bank performs such tasks as making monthly bill payments, managing investment portfolios, and managing the estates of deceased persons. What are such services called?
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D) trust services
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37) Which of the following agencies guarantees the safety of all of its members' bank accounts?
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D) Federal Deposit Insurance Corporation
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38) Which of the following terms refers to the percentage of its deposits a bank must hold, in cash or on deposit, with a Federal Reserve bank?
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E) reserve requirement
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39) Which of the following terms refers to the interest level at which member banks can borrow money from the Federal Reserve System?
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A) discount rate
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40) Which of the following terms refers to the interest level at which commercial banks lend reserves to each other, usually overnight?
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B) key rate
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41) Which of the following best describes what is called the "open-market operations" of the Federal Reserve System?
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E) the buying and selling of securities
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42) Which of the following indices indicates the relative strength of the currencies of two countries?
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B) exchange rate
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43) Toyota, based in Japan, would like to build a new factory and a new retail distribution center. Both or either of these may be built in the United States and in Canada. Currently, the U.S. dollar is weak compared to the Canadian dollar. Which of the following would be in Toyota's best interest?
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B) build the cars in the United States and sell them in Canada
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44) Which of the following best describes the portability characteristic of money?
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E) It is light and easy to handle.
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45) Which of the following is a consequence of the divisibility characteristic of money?
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B) Units of money can be accurately matched with the value of goods.
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46) Which of the following affects the value of money?
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A) how much currency is in circulation
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47) Which of the following best describes the durability characteristic of money?
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A) Units of money do not expire after a certain time limit.
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48) Which of the following best describes the stability characteristic of money?
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E) Units of money have relatively constant value.
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49) Money frees society from a system of barter. In doing so, money is performing which of the following functions?
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E) medium of exchange
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50) Which of the following is NOT part of the M-1 supply?
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E) currency value of time deposits
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51) Which of the following is NOT part of the M-2 money supply?
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E) credit card account
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52) Which of the following financial institutions earn profits from loans taken from the funds in each of its depositors' accounts?
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D) commercial banks
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53) Which of the following statements is true?
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C) Since insurance companies also generate revenue from investments of premium payments, market fluctuations may affect one's health insurance premium.
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54) Which of the following financial institutions are considered to be owned by their depositors?
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C) mutual savings banks and credit unions
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55) When buying from a supplier in France, LTD, based in Cleveland, Ohio, has arranged for its bank to pay the supplier the cost of the desired material when it has passed customs in the United States. Which of the following terms is this type of bank promise called?
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D) letter of credit
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56) David has a savings account and a home mortgage with a financial institution. Each year, this institution sends him a dividend check based on his accounts. Which of the following financial institutions is David using here?
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E) mutual savings bank
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57) Which of the following actions can the Federal Deposit Insurance Company take in the event of a failure of one of its insured banks?
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D) The FDIC can allow another bank to take responsibility for the failed bank's liabilities through sale of the failed bank.
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58) Which of the following statements best explains how financial institutions create money?
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C) By taking deposits and loaning out these funds, financial institutions expand the money supply.
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59) Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System?
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C) the President of the United States
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60) How are the individual Federal Reserve Banks organized?
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C) by geographical region—Southeast, Northeast, West, etc.
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61) Which of the following best describes two of the three primary functions of the Federal Reserve System?
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B) aiding banks in conducting business and managing the U.S. money supply and interest rates
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62) Which of the following is NOT a primary tool for controlling the money supply?
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A) taxation
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63) Which of the following statements best describes why U.S. Treasury securities have always been considered risk-free investments?
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A) They are backed by the U.S. government.
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64) Which of the following laws has had significant effects in maintaining bank identity records?
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B) the USA Patriot Act
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65) Which of the following federal laws made transactions between banks significantly more efficient?
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A) the Check Clearing for the 21st Century Act
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66) Which of the following statements best describes how the Automated Clearing House Network (ACH) maintains its integrity as a processor of electronic payments?
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D) The ACH network is a not-for-profit association and is regulated by its independence from outside interests.
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67) Which of the following financial institutions was taken over by the Federal House Finance Agency in 2008 as a part of the Emergency Economic Recovery Act?
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C) Federal Home Loan Mortgage Corporation
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68) Which of the following transactions is not included among Automated Clearing House payments?
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A) ATM deposits
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69) Which of the following pieces of information is not required by the USA Patriot Act for banks to collect for every customer?
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D) place of birth
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70) Which of the following institutions most helps simplify transactions made among buyers and sellers in different countries?
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D) commercial banks
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71) Which of the following is the main justification for the World Bank to fund national improvements by making loans to build roads and hospitals?
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B) The resulting improvements will help increase the productive capacity, and hence the international trade, of certain developing countries.
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72) Which of the following describes the requirements that the International Monetary Fund has made on certain developing countries?
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A) that the government decrease spending in order to bring inflation under control
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73) David is saving $25 a week toward getting a new truck. Which function of money does this illustrate?
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D) store of value
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74) A jeweler assesses the value of a flawless white diamond as considerably more than that of a rhinestone. Which function of money does this illustrate?
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D) measure of worth
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75) In which of the following financial institutions would all of the people who allow it to hold their funds be able to participate in major decision-making?
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D) credit union
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76) Which of the following reasons is the primary motivator for a commercial bank to acquire new depositors?
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C) A new deposit account will make more funds available to give out in loans.
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77) Suppose a list of all American deposit institutions were created and a name chosen randomly from this list. Which of the following would the chosen institution most likely be?
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A) a commercial bank
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78) Which of the following statements best describes why a decrease in reserve requirements often results in an increase in the money supply?
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C) A decrease in reserve requirements gives banks more money to lend out.
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79) Which of the following statements best describes why an increase in the discount rate often results in a decrease in the money supply?
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D) An increase in the discount rate will lower the overall number of loans from the Federal Reserve Banks to individual banks.
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80) Under which of the following circumstances would the Federal Reserve System want to increase the money supply by increasing the discount rate?
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A) The economy is experiencing severe inflation, and market activity is very low. Yet the financial institutions have a great deal of M-1 resources at their disposal that they are not investing.
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81) Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the reserve requirement?
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B) The economy is experiencing severe inflation, yet market activity has been extremely high and erratic.
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82) Which of the following recent events represents the two most significant impacts on changes in the money and banking system since 2000?
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D) the rise of electronic technologies in banking and the rise in government intervention in helping to stabilize the U.S. financial system
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83) Regarding the international payments process, which statement is true?
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E) Money does not actually have to flow between two countries.
