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

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Question 31

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After years of banking with Quality Bank and Trust,Saul decided to switch to a competing institution.Thanks to changes in government regulation,his search will uncover a variety of options,however,he will also learn that banks and nonbanks have merged in order to be more competitive in the banking and financial services industries,which may or may not increase his options.

A) True
B) False

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Question 32

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Savings and loan associations,also known as thrift institutions,were created to promote consumer thrift and home ownership.

A) True
B) False

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Question 33

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The M-1 money supply includes money in savings accounts,mutual funds,and money market accounts.

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.

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

Prior to the establishment of the Federal Reserve System in 1913,the United States had no experience with a central bank.

One thing is for certain,the average borrower's risk-averse behavior did not contribute to the problems that spiraled out of control and caused the banking crisis of 2008-2010.

An increase in the discount rate produces a decrease in money supply.

For banks,the check processing activities:

Herb has $20,000 in an interest-bearing time deposit with the Applebottom Bank and Trust Company.While earning a relatively attractive rate of interest,Herb had to agree to not withdraw any of the funds until the end of a three-year period.Herb's investment represents a(n) :

Certificates of deposit (CDs)represent demand deposits issued by banks.

Banks prefer that customers use an electronic funds transfer system rather than traditional methods of payment because:

Commercial banks,savings and loan associations,and credit unions all represent components of the American banking system.

While an electronic funds transfer represents a faster and more flexible method of making payments than writing checks,it is more expensive for banks.

Newspapers in the nation of St.Lunatic report a significant increase in money supply during the past few months.This information indicates that St.Lunatic may experience a serious recession in the near future.

Historically,coins and paper money complicated the exchange process.

The __________ insures deposits held in credit unions.

A(n) __________ allows money to be exchanged electronically more quickly and more economically than with paper checks.

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

The Megabux National Bank currently has deposits of $200 million.If the Fed establishes a reserve requirement of 12 percent,Megabux National must hold reserves of _______ against its deposits.