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

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Question 81

Multiple Choice

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Traditionally, banks provide loans to individuals and companies according to the recipient's

A) future earnings potential.
B) family history.
C) volume of credit already established.
D) creditworthiness.

E) B) and D)
F) B) and C)

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Question 82

Multiple Choice

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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." -As the bank has grown and expanded to other towns in its region, several of its business customers are participating in global trade. Which of the following services provided by the bank would help companies conduct international business?

A) letters of credit
B) banker's transactions
C) certificates of deposit
D) trade exchange letters

E) A) and B)
F) A) and C)

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Question 83

True/False

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Next month, Bigbux Bank plans to increase the amount of new loans it makes. As a member bank of the Federal Reserve, Commerce can borrow from the Fed. Bigbux will charge the customer an interest amount greater than the discount rate.

The U.S. government's lack of regulation alone caused the banking crisis and collapse of banks that had been in business for several decades.

Lower fees and better interest rates motivate customers to open accounts with online banks. However, the lack of personal service and concern for information security encourages some customers to return to a traditional bank.

As is common payroll procedure for most employers, Penelope's company ________ her paycheck semimonthly into her checking account. This is a paperless process and no check is issued to the employee. By logging into her personnel system, Penelope has record of the net pay that was deposited into her personal checking account and an account of how much was taken out for taxes, Medicare, social security (FICA) , and other deductions. Penelope's company has adopted an efficient ________ system.

Both checks and debit cards will immediately transfers funds from the customer's account to the seller's account.

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

The Fed commonly buys or sells U.S. government securities to regulate the money supply.

International bankers prefer to invest in their own countries whenever possible.

According to the Spotlight on Small Business box, SoFi strives to branch out from student loan refinancing to become the bank of choice for Millennials.

The FDIC exists to maintain the public's confidence in the banking system.

Checking accounts that pay interest to depositors have experienced solid growth in recent years.

Which of the following historical events motivated Congress to establish the Federal Reserve System?

________ involve(s) the Fed buying and selling U.S. government securities to increase or decrease the money supply.

Which of the following represents a benefit of coins over paper money?

Hunter 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 Hunter's credit card information for other hotel purchases. The type of card that Hunter is using is a smart card.

Today's consumers have fewer options and less flexibility as a result of increased regulation of the banking industry.

The organization responsible for conducting monetary policy in the United States is the

The strength of the U.S. dollar relative to other currencies depends mainly on