Question 1

The one area the Federal Reserve System has very little control over is the strength of the U.S. dollar against other currencies.

Accepted Answer

A) True 
 B)False

Question 2

Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the discount rate?

Accepted Answer

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.
B)   The economy is experiencing severe inflation, and most financial institutions have low M-1 resources at their disposal, yet there is a great deal of market activity.
C)   The economy is experiencing severe deflation, 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.
D)   The economy is experiencing severe deflation, and most financial institutions have low M-1 resources at their disposal, yet there is a great deal of market activity.
E)   The economy is experiencing wild fluctuations, and most financial institutions have low M-1 resources at their disposal.F) A) and C)
G) A) and B)

Question 3

Which of the following affects the value of money?

Accepted Answer

A)   How much currency is in circulation
B)   How many units the currency can be divided into
C)   How portable the form of currency is
D)   How durable the form of currency is
E)   How much currency has been savedF) B) and E)
G) A) and C)

Question 4

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following banking instruments has a fixed term?

Accepted Answer

A)   Demand deposits
B)   Time deposits
C)   Money market mutual funds
D)   Credit card accounts
E)   Savings accountsF) C) and D)
G) B) and E)

Question 6

Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System?

Accepted Answer

A)   The Senate
B)   The House of Representatives
C)   The President of the United States
D)   The Council of American Governors
E)   The people of the United StatesF) A) and B)
G) A) and C)

Question 7

Which of the following agencies guarantees the safety of all of its members' bank accounts?

Accepted Answer

A)   Internal Revenue Service
B)   Federal Open Market Committee
C)   Federal Reserve Bank
D)   Federal Deposit Insurance Corporation
E)   Federal Exchange CommissionF) A) and B)
G) C) and E)

Question 8

A check is an order to a bank to withdraw funds at any time.

Accepted Answer

A) True 
 B)False

Question 9

Money deposited into a commercial bank has the potential of increasing the overall money supply.

Accepted Answer

A) True 
 B)False

Question 10

What is the interest rate offered by banks to only their most creditworthy commercial customers?

Accepted Answer

A)   Fixed
B)   Prime
C)   Variable
D)   Prime plus 1
E)   Below primeF) A) and E)
G) D) and E)

Question 11

The international payments process that moves money between buyers and sellers on different continents is subject to worldwide policy systems.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following laws has had significant effects in maintaining bank identity records?

Accepted Answer

A)   The Check Clearing for the 21st Century Act
B)   The USA Patriot Act
C)   The Bank Secrecy Act
D)   The Federal Reserve Act
E)   The Emergency Economic Stabilization ActF) All of the above
G) A) and B)

Question 13

When the value of a currency is strong in the international market, what happens to trade?

Accepted Answer

A)   Trade increases because the cost of the item is more affordable in the international market.
B)   Trade decreases because the cost of the item is more expensive in the international market.
C)   Trade increases because sales decrease, creating a more competitive market.
D)   Trade decreases because the manufacturers limit production of the item.
E)   Trade increases with a slower revenue growth.F) B) and E)
G) C) and D)

Question 14

Explain the need for restricting banks to lending out only 90 percent of their deposit funds.

Accepted Answer

If banks were allowed to lend out of all...

Question 15

How does an automated teller machine aid in the customer's ability to conduct transactions whenever needed?

Accepted Answer

A)   By processing payments in real time, electronically
B)   By allowing a customer to have a line of credit until business can be conducted within regular banking hours
C)   By taking deposits and making loans on demand
D)   By allowing electronic account related activities every day of the week, 24 hours a day
E)   By transferring funds from the Reserve Bank to meet transaction needsF) A) and C)
G) C) and D)

Question 16

What is the difference between a credit card and a debit card?

Accepted Answer

Credit cards allow users to borrow money...

Question 17

The management of assets or investments offered by a commercial bank on behalf of an individual can be conducted by a bank through

Accepted Answer

A)   trust services.
B)   letters of credit.
C)   banker's acceptance notes.
D)   individual retirement accounts.
E)   securities investments deals.F) A) and C)
G) A) and B)

Question 18

Describe the Check Clearing for the 21st Century Act and its effect on the writing of checks for the future.

Accepted Answer

The Check Clearing for the 21st Century ...

Question 19

Which of the following BEST describes the durability characteristic of money?

Accepted Answer

A)   Units of money do not expire after a certain time limit.
B)   Units of money can be matched with the value of goods.
C)   Units of money allow people to measure the relative value of goods and services.
D)   Units of money of different nations are easily converted to other units of money.
E)   Units of money have lasting value.F) B) and D)
G) C) and D)

Question 20

Which of the following BEST describes the portability characteristic of money?

Accepted Answer

A)   If it wears out, it can be replaced.
B)   Units of money can be matched with the value of goods.
C)   It can be exchanged across national borders.
D)   It allows people to measure the relative value of goods and services.
E)   It is light and easy to handle.F) A) and D)
G) A) and E)

Exam 16: Understanding Money and the Role of Banking

Which of the following banking instruments has a fixed term?

Correct AnswerverifiedShow Answer

When the value of a currency is strong in the international market, what happens to trade?

Correct AnswerverifiedShow Answer

The one area the Federal Reserve System has very little control over is the strength of the U.S. dollar against other currencies.

Correct AnswerverifiedShow Answer

The management of assets or investments offered by a commercial bank on behalf of an individual can be conducted by a bank through

Correct AnswerverifiedShow Answer

What is the interest rate offered by banks to only their most creditworthy commercial customers?

Correct AnswerverifiedShow Answer

Under which of the following circumstances would the Federal Reserve System want to decrease the money supply by increasing the discount rate?

Correct AnswerverifiedShow Answer

A check is an order to a bank to withdraw funds at any time.

Correct AnswerverifiedShow Answer

What is the difference between a credit card and a debit card?

Correct AnswerverifiedCredit cards allow users to borrow money...View AnswerShow Answer

Which of the following BEST describes the portability characteristic of money?

Correct AnswerverifiedShow Answer

Which of the following political bodies appoints the members of the board of governors for the Federal Reserve System?

Correct AnswerverifiedShow Answer

Which of the following agencies guarantees the safety of all of its members' bank accounts?

Correct AnswerverifiedShow Answer

The international payments process that moves money between buyers and sellers on different continents is subject to worldwide policy systems.

Correct AnswerverifiedShow Answer

Explain the need for restricting banks to lending out only 90 percent of their deposit funds.

Correct AnswerverifiedIf banks were allowed to lend out of all...View AnswerShow Answer

How does an automated teller machine aid in the customer's ability to conduct transactions whenever needed?

Correct AnswerverifiedShow Answer

Which of the following BEST describes the durability characteristic of money?

Correct AnswerverifiedShow Answer

The Federal Deposit Insurance Corporation is the government agency that regulates American banks.

Correct AnswerverifiedShow Answer

Which of the following laws has had significant effects in maintaining bank identity records?

Correct AnswerverifiedShow Answer

Money deposited into a commercial bank has the potential of increasing the overall money supply.

Correct AnswerverifiedShow Answer

Describe the Check Clearing for the 21st Century Act and its effect on the writing of checks for the future.

Correct AnswerverifiedThe Check Clearing for the 21st Century ...View AnswerShow Answer

Which of the following affects the value of money?

Correct AnswerverifiedShow Answer

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Credit cards allow users to borrow money...
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If banks were allowed to lend out of all...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The Check Clearing for the 21st Century ...
View Answer

Correct Answer
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