Money, Financial Institutions, and the Federal Reserve (20 L.S.)

Question 1

An increase in the reserve requirement will ___ the amount of money available for lending to customers.

Answer 1

Decrease

Question 2

The ___ ___ is a powerful tool of the Federal Reserve that controls the amount of money banks have available to lend to customers.

Answer 2

Reserve Requirement

Question 3

Disadvantages of bartering include the fact that:

Answer 3

• Your items of value may have a limited life

- You have to carry around goods that are hard to transport

Question 4

Services provided by nonbanks:

Answer 4

• Accept no deposits
• offer many services provided by regular banks
• —Examples of nonbanks—-
• -life insurance
• -pension funds
• -brokerage firms
• -commercial finance cp
• -corporate financial services (like GE Capital)

Question 5

The money supply term that includes readily available cash, checking and savings accounts, individual money markets funds, and Certificates of Deposit is…

Answer 5

M-2

Question 6

A type of time deposit that earns interest which is to be delivered on a future maturity date is called a __ of ___.

Answer 6

Certificate of Deposit (CD)

Question 7

Open-market operations consist of the buying and selling of:

Answer 7

Government Bonds

Question 8

A banker’s ____ is a promise that the bank will pay some specified amount at a particular time with no conditions.

Answer 8

Banker’s Acceptance

Question 9

A way to send transactions directly from one computer to another instead of using paper check

Answer 9

• Electronic funds transfer (EFT)

- Debit Cards

Question 10

Nonbanks are financial organizations that accept no ____ but offer many of the services proved by regular banks.

Answer 10

No deposits

Question 11

If a bank were to fail, the role of the FDIC would be to arrange to have that bank’s accounts transferred to another bank or….

Answer 11

Reimburse depositors up to $250,000 per account

Question 12

The discount rate is…

Answer 12

The interest rate that the Federal Reserve charges member banks

Question 13

The ___ ____ is responsible for financing international economic development and is sometimes called the International Bank for Reconstruction and Development.

Answer 13

World Bank

Question 14

Credit unions

Answer 14

• Nonprofit
• Member-owned financial cooperatives
• Interest-bearing checking accounts at high rates
• short-term loans
• Tax-exempt organizations

Question 15

A demand deposit is the technical name for a(n) ___ account since it is a means of paying for almost any purchase or transaction.

Answer 15

Checking Account

Question 16

In the past, objects such as salt, feathers, fur pelts, stones, rare shells, tea and horses have served as….

Answer 16

Money

Question 17

This is considered a profit seeking organization that has both depositors and borrowers.

Answer 17

Commercial banks

Question 18

A ___ ___ serves the same function as a check by withdrawing funds from a checking account.

Answer 18

Debit Card

Question 19

The abbreviation for the independent agency of the United States that insures bank deposits is the ___.

Answer 19

Federal Deposit Insurance Corporation (FDIC)

Question 20

A letter of credit is a promise by a bank to…

Answer 20

Pay the seller a given amount if certain conditions are met.

Question 21

S&Ls were originally set up to…

Answer 21

promote home ownership

Question 22

A savings account is called a(n) ____ deposit because the bank can require you to make prior notice before withdrawal.

Answer 22

Time Deposit

Question 23

Effects of the lack of a banking system in early America include the fact that:

Answer 23

• Land banks were created
• The barter system was commonplace
• Local governments often would issue currency

Question 24

____ funds are monies put aside by corporations and others for the retirement of their employees.

Answer 24

Pension funds

Question 25

The ____ includes coins and paper bills, demand deposits, share drafts, and traveler's checks.

Answer 25

M-1

Question 26

The term for the money supply that includes cash, checking accounts, Certificates of Deposits, money markets, and big deposits such as institutional money market funds is...

Answer 26

M-3 M3=M1+M2+Big deposit

Question 27

The five standards for a useful form of money are:

Answer 27

- Portability - Divisibility - Stability - Durability - Uniqueness

Question 28

The money supply is controlled by the Federal Reserve in order to better manage the ____ of goods and services.

Answer 28

Prices

Question 29

The five major parts to the Federal Reserve System include:

Answer 29

``` 1-the board of governors 2-the Federal Open Market Committee (FOMC) 3- 12 Federal Reserve banks 4- Three advisory councils 5- The member banks of the system ```

Question 30

The reserve requirement is...

Answer 30

A percent of commercial banks' checking and savings accounts they must keep in the bank

Question 31

The ____ ____ is a powerful tool of the Federal Reserve that controls the amount of money banks have available to lend to customers.

Answer 31

Reserve Requirement

Question 32

Economic growth and he creation of jobs depend on the ready availability of _____.

Answer 32

Money

Question 33

The competition between banks and nonbanks has ____, with the dividing line becoming less apparent.

Answer 33

increased

Question 34

A barter ___ is a modern-day technique to swap goods and services for other goods and services through the use of trade credits.

Answer 34

Barter Exchange

Question 35

Banking has to be seen today as....

Answer 35

Global in nature.

Question 36

Major services that banks provide to international businesses include:

Answer 36

- letters of credit - Banker's acceptances - Money Exchange

Question 37

The primary reason for the creation of the Federal Reserve was to...

Answer 37

Prevent another crisis of bank failures | --shortage of cash

Question 38

Reasons the U.S. money and economy are closely linked to the rest of the world include:

Answer 38

- Money is free to flow around the world and is not limited to one country - With international trade, a major event is felt by all

Question 39

The check ____ function of the Federal Reserve enables banks to settle demand deposits between member banks.

Answer 39

Check-Clearing function

Question 40

A smart card is an electronic funds transfer tool that serves as a(n):

Answer 40

- credit card - Debit card - Phone card - Driver's license card - and more...

Question 41

What does the Federal Reserve make available in order for people to buy goods and services?

Answer 41

Money supply

Question 42

TARP (Troubled Assets Relief Program) was proposed by the Treasury Department to be a $700 billion ____ package.

Answer 42

Bailout package

Question 43

Considered the dinosaur of the banking industry, written ___ are considered labor intensive, subject to error and crime, and expensive to process.

Answer 43

Written Checks